Accounting: The Basic Principles

What can be called Accounting? Accounting, in its simplest form can be defined as the process of recording financial data from an external source into books of accounts that are then reviewed by owners and directors of a business so that they may make decisions accordingly.

The principles of Accounts are complex and numerous. Accounting itself has various branches and sub branches. Those people who work on accounts as well as manage them are known as accountants. The two main fields are that of the financial accountant and the chartered accountant. Other than these, there are many different fields of accounting. Accounting is a difficult and tiring process, not to mention complex. It involves taking in every single financial detail of a business organization and writing it down. In the olden days and even now, accounting holds great importance. Businesses thrive after they review their expenses and make adjustments accordingly; a small decrease in investment in one area and an increased production in another area for example. Every business man knows that every single penny counts when trying to run a business.

The job of an accountant sounds simple. How hard could it be to read something and type it? In the modern world, the process of accounting has been altered so as to ease the burden on both the accountant and the business, for while many companies have become more successful after managing their finances, many other companies have also been forced to shut down and their owners left with little or nothing to themselves due to the laws of unlimited liability, which stated that the owner of a business must sell all his personal assets and belongings in order to repay any debt his or her business may have. Accounts, in wrong hands or the hands of competitors, can prove to be very dangerous.

In modern times, there are numerous applications and processes that are available for downloading through the World Wide Web. Some are more advanced than others and they only require the accountant to type a few words and numbers and they are automatically placed in their respective areas where they are later reviewed for decision making.

Accountants hold great importance for a business. From a small verbal transaction, to a large purchase of goods, it the job of the accountant to record every transaction that takes place in the business and also determine where the business and lacking and where it is outmatching its competition. From this information, it is the duty of the accountant to create a trial balance and an income statement to show whether the business is making a profit or is it suffering losses. In the olden days, each transaction was written by hand in “T” accounts with columns labeled “Debit” or “Credit”, showing the assets and liabilities of the business respectively. Nowadays an accountant merely has to type the transaction and the software does all the placement and calculations. While it may seem easy to talk about, the actual job is much more difficult.

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