Good Day, everyone! Finally, today I'm going to start my first lesson. Before you can explore more about accounting, you have to know what is Accounting. I have prepared a short note about intro to accounting. Read below.
A. Definition of Accounting
The aim of accounting is to provide information on the business activities to several interested groups. In achieving these objectives, there are several process that are involved.
Accounting is the process of identifying, measuring, recording and communicating economic events of an organization to interested users of the information. The information is communicated through the preparation and distribution of accounting reports, the most common of which are called financial statements. The financial statements are prepared according to generally accepted accounting principles, concepts, standards, and regulations.
Identifying- Identify business activities to be recorded by an enterprise. Ex. Paying wages to employees, buying motor vehicles to sell to customers and collecting payment received from the sale of the motor vehicles. These data must be sort into orderly and meaningful categories ex. Receipts, payment, purchases, sales.
Measuring- The economic event, which is called transactions by accountants, must be measured in financial terms, ex. “RM” and “sen”.
Recording- The transactions are recorded in the books of the business. Ex. Journals and ledgers
Communicating- the accounting information is communicated through the preparation and distribution of accounting reports to the owners of the business or to others allowed to receive this information.
B. Definition of Bookkeeping
Bookkeeping is only part of accounting.
It is the mechanical aspects of accounting such as classifying, recording and summarizing of business transactions prior to the preparation of financial reports. Bookkeeping is normally performed by individuals with limited skills in accounting.
Distinguishing between Bookkeping and Accounting
Bookkeeping refers to the mechanical aspects of accounting such as recording, classifying and summarizing transactions. This is only part of the Accounting process. In total, accounting involves the entire process of identification, measurement, recording and communication.
to be continued...