concept, nature and limitation of financial accounting
MEANING OF ACCOUNTING:
Accounting is the process of recording, classifying, summarizing, analyzing and interpreting the financial transactions of the business for the benefit of management and those parties who are interested in business such as shareholders, creditors, bankers, customers, employees and government. Thus, it is concerned with financial reporting and decision making aspects of the business.
The American Institute of Certified Public Accountants Committee on Terminology proposed in 1941 that accounting may be defined as, “The art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character and interpreting the results thereof”.
FINANCIAL ACCOUNTING:
The term ‘Accounting’ unless otherwise specifically stated always refers to ‘Financial Accounting’. Financial Accounting is commonly carries on in the general offices of a business. It is concerned with revenues, expenses, assets and liabilities of a business house. Financial Accounting has two-fold objective, viz,
To ascertain the profitability of the business, and
To know the financial position of the concern.
NATURE AND SCOPE OF FINANCIAL ACCOUNTING:
Financial accounting is a useful tool to management and to external users such as shareholders, potential owners, creditors, customers, employees and government. It provides information regarding the results of its operations and the financial status of the business. The following are the functional areas of financial accounting:-
Dealing with financial transactions: Accounting as a process deals only with those transactions which are measurable interms of money. Anything which cannot be expressed in monetary terms does notform part of financial accounting however significant it is.
Recording of information: Accounting is an art of recording financial transactions of a business concern. Thereis a limitation for human memory. It is not
Accounting is the process of recording, classifying, summarizing, analyzing and interpreting the financial transactions of the business for the benefit of management and those parties who are interested in business such as shareholders, creditors, bankers, customers, employees and government. Thus, it is concerned with financial reporting and decision making aspects of the business.
The American Institute of Certified Public Accountants Committee on Terminology proposed in 1941 that accounting may be defined as, “The art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character and interpreting the results thereof”.
FINANCIAL ACCOUNTING:
The term ‘Accounting’ unless otherwise specifically stated always refers to ‘Financial Accounting’. Financial Accounting is commonly carries on in the general offices of a business. It is concerned with revenues, expenses, assets and liabilities of a business house. Financial Accounting has two-fold objective, viz,
To ascertain the profitability of the business, and
To know the financial position of the concern.
NATURE AND SCOPE OF FINANCIAL ACCOUNTING:
Financial accounting is a useful tool to management and to external users such as shareholders, potential owners, creditors, customers, employees and government. It provides information regarding the results of its operations and the financial status of the business. The following are the functional areas of financial accounting:-
Dealing with financial transactions: Accounting as a process deals only with those transactions which are measurable interms of money. Anything which cannot be expressed in monetary terms does notform part of financial accounting however significant it is.
Recording of information: Accounting is an art of recording financial transactions of a business concern. Thereis a limitation for human memory. It is not