Accounting is a process of receiving, organizing, recording, preparing, tracking and presenting information relevant to the accounting process. This includes the collection, interpretation, preparation and use of information related to transactions in the market. Some of the concepts that are used in accounting include asset information management, control, preventive and material measurement. The main objective of accounting is to provide decision makers with information relevant to the performance of the business and planning.
The accounting process is divided into two major groups, namely primary accountants and managers, or managers and accountants. Basic accounting comprises the routine process involved in managing the financial records of a company. The basic accounting process includes preparation of accounting documents such as income statements, balance sheet, statement of cash flows, profit and loss account, and statement of accounting principles.
Under the broad topic of accounting, there are four major parts including: personal or corporate accountancy, management accounting, financial reporting and audit. It is very important for an accountant to keep a proper record of all the financial transactions of a company. All the transactions in a firm are included in the financial statements. The financial statements are the records that contain all the financial data that are required by the stakeholders such as the creditors, the owner, tax authorities, and shareholders to make informed decision about the activities of the firm.
All the financial transactions made by the accountants have an account number. All the transactions are entered into the ledger, a record of the transactions, which facilitates the notification of the parties involved in particular transaction. The term accountancy is related to the word account, while all the terms used in this field mean basically the same thing. There are numerous kinds of accountants such as chartered accountants, bookkeepers, financial managers, land accountants, internal auditors, financial managers, office accountants, provostrators, and supervisory accountants.
In the period before 1970s, the accountant form a part of management and they were considered as managers of the business. Today, majority of the businesses in the United Kingdom use the cost accounting system. Cost accounting involves the use of information systems, data processing systems, project accounting software, fiscal instruments, and other managerial accounting software that makes decisions about cost allocation among the different functional areas within a firm. For instance, if there is a marketing department, the managers can make decisions concerning inventory, pricing, promotion, and customer service using the available information.
In the world of finance, accounting reports show the financial performance of the firm. It also helps managers make decisions and in providing investment advice. For instance, in sales, an accountant is responsible to give an analysis on selling activities and make decisions as to whether the firm should proceed with the sale or not. Similarly, an account will provide an analysis of all the assets, liabilities, capital, and profits of a firm. This means that the accountants are able to determine the net worth and the net asset value of the firm. All of these decisions are made based on the information provided by the accounting records.