Accounting - Concept Brief
Accounting is the language of business.
Business firms are established to make profits. Profit is the return to the owners of business. Accounting determines the amount of profit made by a business firm in a period.
Accounting records and statements have many other uses. Accounting is defined as providing information to facilitate decision making by managers and investors.
Accounting is based on documentary evidence of a transaction involving money and assets between a business firm and other parties. These documents are called as vouchers in accounting jargon.
Based on vouchers, accountants first enter the transaction in a journal. From the entries in the journal, they make posting in the ledger in separate accounts maintained for various assets, liabilities, revenues and expenses, and various parties representing customers and suppliers.
From the account balances in the ledgers, various accounting statements are prepared.
Profit and loss account, balance sheet and cash flow statement are important statements to be prepared by companies and circulated to their shareholders.
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