Kerala Plus One Accountancy Notes Chapter 1 Introduction to Accounting
Summary
Meaning of Accounting:
Accounting is a process of identifying, measuring, recording the business transactions and communicating thereof the required information to the interested users.
Accounting as a source of information:
Accounting as a source of information system is the process of identifying, measuring, recording and communicating the economic events of an organization to interested users of the information.
Users of accounting information:
Accounting plays a significant role in society by providing information to management at all levels and to those having a direct financial interest in the enterprise, such as present and potential investors and creditors.
Accounting information is also important to those having an indirect financial interests, such as regulatory agencies, tax authorities, customers, labour unions, trade associations, stock exchanges, and others.
Qualitative characteristics of Accounting:
To make accounting information decision-useful, it should possess the following qualitative characteristics.
- Reliability
- Understandability
- Relevance
- Comparability
The objective of accounting:
The primary objectives of accounting are to:
- Maintain records of business;
- Calculate profit or loss;
- Depict the financial position: and
- Make information available to various groups and users.
Role of accounting:
Accounting is not an end in itself. It is a means to an end. It plays the role of a:
- Language of a business
- Historical record
- Current economic reality
- Information system
- Service to users