Accounting is the science of recording financial transactions and activities for accounting and business purposes. Accounting is used by all organizations in all fields to record financial transactions, track budgeting, plan for resource allocation and control cost. Accounting includes the systematic recognition, measurement, reporting, and interpretation of financial data relating to an individual or organization’s financial activities. The process of accounting involves 3 key stages: preparation, analysis, and reporting.
In this article we are going to discuss the main article of how does accounting work. Firstly we will cover the basic definition. Then we will see the description of different types of accounting. After that we will checkout some of the most common uses of accounting such as internal/external bookkeeping, management accounting, financial statement, cash flow analysis and others.
In order to describe what kind of accounting someone does, an individual must first of all understand what is meant by ‘accountancy’. In general the term accountancy simply refers to the art of creating financial statements or reports, which are accounts of the transactions and activities of an organization. Accounting involves the generation of financial statements or reports from the activities of an entity. This means that any type of business could be described as an entity, including private companies, public enterprises, partnerships, mutual funds, among others.
The term accounting period can also be defined as the time period during which the transactions and activities were conducted. Generally the accounting period is a fixed number of days, inclusive of a Sunday to complete one year’s accounts, excluding special and quarterly reports. The most common accounting standards are generally used by all organizations, including small businesses.
All the three main phases or stages of accounting include auditing, cost accounting, and assurance accounting. Cost accounting is the stage where an accountant makes cost assumptions in the process of coming up with the financial statements. Auditing is the second stage, in which the accountant presents the results of the investigation in a report to the senior management, for their review and assessment. The third stage includes tax accounting, which involves the preparation of the financial reports. All these three stages are necessary for proper analysis of the financial situation of the company.
Now that you have read the main article of this article, you should know what accounting really is. Accounting is a discipline dedicated to helping managers make better use of resources to maximize profits and reduce costs. The main purpose of accounting is to provide information needed by managers to make sound decisions in different circumstances. Today accounting is a well established profession in the United States and around the world. If you want to become an accountant, you can find many schools that offer programs leading to a certificate in accounting.