The committee on Terminology set up by the American Institute of Certified Public Accountants formulated the following definition of accounting in 1961:
“Accounting is 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 result thereof’
As per this definition, accounting is simply an art of record keeping. The process of accounting starts by first identifying the events and transactions which are of financial character and then be recorded in the books of account. This recording is done in Journal or subsidiary books, also known as primary books. Every good record keeping system includes suitable classification of transactions and events as well as their summarization for ready reference. After the transactions and events are recorded, they are transferred to secondary books i.e. Ledger. In ledger, transactions and events are classified in terms of income, expense, assets and liabilities according to their characteristics and summarized in profit and loss account and balance sheet. Essentially the transactions and events are to be measured in terms of money. Measurement in terms of money means measuring at the ruling currency of a country, for example, npee in India, dollar in U.S.A. and like.
However, the above-mentioned definition does not reflect the present day accounting function. The dimension of accounting is much broader than that described in the above definition. According to the above definition, accounting ends with interpretation of the results of the financial transactions and events but in the modern world with the diversification of management and ownership, globalization of business and society gaining more interest in the functioning of the enterprises, the importance of communicating the accounting results has increased and therefore, this requirement of communicating and motivating informed judgment has also become the part of accounting as defined in the widely accepted definition of accounting, given by the American Accounting Association in 1966 which treated accounting as
The process of identifying, measuring and communicating economic information to permit informed judgments and decisions by the users of accounts
Thus, accounting may be defined as the process of recording, classifying, summarizing, analyzing and interpreting the financial transactions and communicating the results thereof to the persons interested in such information.
With the scope of Accounting that has become so wide today, it is very important that the book keeping of the business is done by proper professionals who has the thorough knowledge of the accounting and book keeping and can guide and help the business for the proper recording of transactions.
Bookkeeping in the literal sense is an activity concerned with the recording of financial data relating to business operations in a significant and orderly manner. It covers procedural aspects of accounting work and embraces record keeping function. Obviously, book-keeping procedures are governed by the end product, the financial statements. The term financial statements’ means Profit and Loss Account and Balance sheet including Schedules and Notes forming part of Accounts. Profit and Loss Account gives result of economic activities for a period and Balance Sheet states the financial position at the end of the period. Book-keeping also requires suitable classification of transactions and events. This is also determined with reference to the requirement of financial statements. A book-keeper may be responsible for keeping all the records of a business or only of a minor segment, such as position of the customers’ accounts in a departmental store. Accounting is based on a careful and efficient book-keeping system.
The essential idea behind maintaining book-keeping records is to show correct position regarding each head of income and expenditure. A business may purchase goods on credit as well as in cash. When the goods are bought on credit, a record must be kept of the person to whom money is owed. The proprietor of the business may like to know, from time to time, what amount is due on credit purchase and to whom. if proper record is not maintained, it is not possible to get details of the transactions in regard to the expenses. At the end of the accounting period, the proprietor wants to know how much profit has been earned or loss has been incurred during the course of the period. For this lot of information is needed which can be gathered from a proper record of the transactions. Therefore, in book-keeping, the proper maintenance of books of account is indispensable for any business.
Meaningful, well-organized financial records ensure that your business operations will run more efficiently on a daily basis and are the foundation of a successful business. Our qualified staff can assist you with the day-to-day tasks associated with bookkeeping.
When Corporate Financial Accounting is so important in every field and is an element of utmost important, then it is as important to maintain your books of accounts accurate. BMS having a group of Professional Chartered Accountants can give you the best of services and helps to maintain the books of accounts up to date and accurate
A few among the wide range of accounting services we offer, are as follows