ACCOUNT

An account is a record in an accounting system that tracks the financial activities of a specific asset, liability, revenue, or expense… . Each individual account is stored in the general ledger and used to prepare the financial statements at the end of an accounting period.

Accounting is a system of recording financial transaction with both numbers  and text in the form of financial statements. It provides an essential tool for billing customer, keeping track of assets and liabilities(debts), determining profitability and tracking the flow of cash.

PURPOSE OF ACCOUNTS

The purpose of accounts is to accumulate and report on financial information about the performance, financial position and cash flows of a business. This information is than used to each decisions about how to manage the business, or invest in, or lend money to it.

It is used to ascertain profit or loss during a specific period and to show financial position of the business.

ACCOUNTING

It is the art of recording, classifying, summarising financial transactions, in terms of money, in a systematic manner and interpreting the results theme of. Book-Keeping is mainly concerned with the recording of business transactions in books of accounts. Accounting includes not only recording of business transactions, but also summarising these transactions, analysing and interpreting their effect on working of the  business. Thus book-keeping is the first stage of accounting. Accounting starts where Book -keeping ends.

BOOK KEEPING

It is the “Art of recording business transactions in a systematic manner”.   It is the “Art of keeping accounts in a regular and systematic manner”.      It teaches us how to maintain books of accounts in a systematic manner.

ORIGIN OF ACCOUNTING

Lucas F.Paciloi, a resident of Venice(Italy), is regarded as the founder of book-keeping. His book “De Computiset Scripturise” was published in 1494, which is regarded as the first book on book-keeping.

NEED OF ACCOUNTING

The main aim of a business is to earn profit. For earning profit, the business man will either purchase the goods in one market at certain price and sell in another market at higher price or he will convert the raw materials into finishes products and sell it to different customers at a price higher than cost of production, so as to earn some profit. But this may not be true in all cases. Sometimes, he may need to sell the goods either at a loss or at a very small margin due to depression in the market for due to competition. However he will be anxious at the year to find out profit or loss and also the financial position of the business.

In order to achieve the above purposes it is necessary to record business transactions according to a well designed system. Book-keeping (in elementary stage) and Accounting(in advanced stage) are the names given to such a system.