Accounting is the process of calculating and recording all the financial information of a company or a business. Every businesses, rather it be small or big has accounts to maintain. Only financial transactions are recorded in the accounting other than that no other functions are recorded doesn’t matter how important those factors are. It is a going concern concept.
Contents
There are three types of accounts
- Real account.
- Tangible real account.
- Intangible real account.
- Personal Account.
- Natural personal account.
- Artificial personal account.
- Representative personal account.
- Nominal Account.
- Account related to gain and loss, expenses and income.
There are three golden rules of Accounting. They are:
- PERSONAL ACCOUNT
- Debit the receiver and
- Credit the giver.
- NOMINAL ACCOUNT
- Debit what comes in and
- Credit what goes out.
- REAL ACCOUNT
- Debit all expenses and losses and
- Credit all incomes and gains.
BENEFITS OF ACCOUNTING
- Maintenance of Business transactions.
- Preparation of Financial Statements.
- Understanding of business whether it is running on profit or loss.
- Understanding of current events.
- Helps to compare current events with the previous ones.
- Systematic records of every transaction
Categories of Accounting:
- Assets: Tangible and Intangible things owned by the business
- Liability: Amount that needed to be paid by the business to the outsiders
- Equity: Asset – Liability
- Expense: Amount paid for purchases
- Income: Amount earned or through sales or services provided by the business.
USERS OF ACCOUNTING
- Potential Investors
- Shareholders
- Competitors
- Suppliers
- Customers
- Environmental groups
- Business owners
FINANCE
Finance actually means anything related to transaction management, investments of money, etc. It involves the use of debit and credit. It is also called channeling funds.
The term Finance is broadly classified into three categories
- Personal Finance: Managing one’s own budget or a family budget is termed as personal finance
- Public Finance: Managing the finance of a group of people is called as Public finance.
- Business or corporate finance: Managing and making financial budget of a business be it sole proprietorship, partnership, or a company, is called business finance. The budget of what is the amount required to purchase, working capital required everything comes under business finance.
Benefits of Financing
- Attract new consumer
- Can improve sales
- Flexibility
- Better Cash flow
- Can be helpful during the time of crisis.