Accounting Overview
 

Accounting is the systematic process of recording, measuring, and communicating financial information about a business or organization. It provides essential data to stakeholders for decision-making, planning, and control.
 

Key Objectives of Accounting
 

• Recording Transactions: Documenting all financial activities accurately.

• Classifying Information: Organizing data into categories such as assets, liabilities, revenues, and expenses.

• Summarizing Data: Preparing financial statements to provide a clear picture of financial performance and position.

• Reporting: Communicating results to stakeholders (owners, management, investors, tax authorities).

• Compliance: Ensuring adherence to accounting standards and regulations.
   

Basic Accounting Principles
 

• Accrual Principle: Record revenues and expenses when they occur, not when cash is exchanged.

• Consistency Principle: Use consistent accounting methods across periods.

• Going Concern: Assume the business will continue operating indefinitely.

• Matching Principle: Match expenses with the revenues they help generate.

• Conservatism: Record expenses and liabilities as soon as possible; revenues only when they are assured.
   

Main Financial Statements
 

1. Balance Sheet (Statement of Financial Position): Shows assets, liabilities, and equity at a specific date.

2. Income Statement (Profit & Loss Statement): Shows revenues, expenses, and profit over a period.

3. Cash Flow Statement: Details cash inflows and outflows.

4. Statement of Changes in Equity: Shows changes in ownership interest over time.

Types of Accounting
 

• Financial Accounting: External reporting for stakeholders.

• Managerial Accounting: Internal reporting to assist management decisions.

• Tax Accounting: Preparing tax returns and planning.

• Auditing: Independent verification of financial statements.