Find the best tutors and institutes for BCom Tuition

Find Best BCom Tuition

Please select a Category.

Please select a Locality.

No matching category found.

No matching Locality found.

Outside India?

Search for topics

Why Accounting is called as

Venkat Dosapati
11/10/2018 0 0

In this article, I am going to explain the accounting in layman terms. Hope you find it useful.

Just Observe the following activities.

  1. Mr.X Gets salary up on working as software employee of Google. Once salary has been credited he spends it for the purchase of goods and services, Children's education, Purchase of house etc. Don't you think Mr.X is performing the economic activity? The Answer is yes. He is playing the commercial operation by paying the consideration in the form of Money for acquiring them. Here the benefit is purely Individual.
  2. Have you heard of Hyderabad Metro Rail which recently began it services and well received by the people of Hyderabad. Whether the services rendered by the Hyderabad Metro Rail Limited to the passengers who travelled through it is an Economic Actvitity or not? The answer is Yes. Here in this economic benefit - Who benefitted? It is Public at large - It is a Social Benefit.
  3. So we can draw a concussion from the above two set of activities - Not all the economic activities are run for the individual economic benefit, such economic activity may create a social advantage too. 

So, How these Economic Activities are performed?

Economic Activities are performed through Transaction and Events. Let us understand what a Transaction and Event is.

The transaction is used to mean a Business / Performance of act / An agreement etc., While Event is used to denote a happening, as a consequence of operations, a result.

Let us understand the above two terms with an example.

Imagine Mr X has a business idea of starting a retail shop at the busy location of Hyderabad. He invests 10,00,000 for running a stationery business, and purchases goods worth 8,00,000 and sells for 9,50,000. He pays shop rent of 1,00,000 and finds that he has left goods worth of 1,00,000.

Mr X, In the above case, carries on Economic Activity. It is through some transactions and events. In the end, he eagers to know running a stationery business is profitable or not.

Sales : 9,50,000

Closing Stock : 1,00,000

Total : 10, 50 ,000

Purchases : 8,00,000

Shop Rent : 1,00,000

Total Expenses : 9,00,000

Surplus : 10,50,000-9,00,000 = 1,50,000

Now will see what the events and transactions in the above economic activity are?

1. Having a surplus of 1,50,000 & Closing stock of worth: 1,00,000 are events since they arise as a result of economic activity

2. Purchase of goods, Sale of assets, Investment of amount in the business, Paying shop rent are like Transactions.

Likewise, Every individual wants to keep a record of all transactions and events and to have adequate information to aid in decision making purpose [ Whether it is worth to run a business or not ].

Accounting has been developed to serve the above purpose as it deals with the measurement of economic activities involving inflow and outflow of financial resources, which helps to create useful information for decision making.

Accounting has a universal application for recording events and transactions of family functions to the functions of a national government. For now, concentrate on business activities conducted by companies/firms/ organisations etc.

The growth of the accounting discipline is closely related to the growth of the business world. Imagine for a while when the business of selling goods and rendering of services has stopped for a day around the globe Whether human being can be able to survive the day? The answer is No. So the business activities had hold importance in today's business world and interlinked with the people's well being and survival.

Accounting as a field of study is best identified with recording and summarising economic activities in the form of transactions and events in the books of accounts/records and communication of financial information about business enterprises to the interested users to facilitate decision making.

Accounting aims to fulfil the needs of the rational and sound decision makers. So It acts as a medium for communication of financial information to users. Thus accounting is called a language of the business.

0 Dislike
Follow 2

Please Enter a comment

Submit

Other Lessons for You

Financial Accounting
Accounting is the art of recording, classifying, summarising in a significant manner regarding money, transaction & events which are at least in part financial interpreting the result thereof. (AICPA...

Rajeshwari M. | 23/11/2018

1 0
0

Margin of Safety?
What is the Margin of Safety? Suppose a class 11th student need 33 marks to pass a paper. If a student gets exactly 33 marks, then he will be a pass. These 33 marks are called Break-Even-Point Marks. ...

CA Prashanth Reddy | 09/08/2018

0 0
0

Is accountancy science and art? Explain ?
Is accountancy science and art?:--Accountancy plays a very important role in these days of growing commercial and trade. Frequently various laws and Acts like—Company’s Act, M.R.T.P. Act are...
K

Kousiki Chakraborty | 05/07/2018

1 0
0

Accounting Process (Foundation Accounting Module-1)
This covers a portion from the second chapter of Accounting Module 1 of CA Foundation- Accounting Process. This is equally applicable for students who are beginners in accountancy.In this, we will learn...

Manju R. | 22/06/2018

0 0
0

What is Co- Branding?
Co branding is the utilization of two or more brands to name a new product. The ingredient brands help each other to achieve their aims. The overall synchronization between the brand pair and the new product...
K

Kousiki Chakraborty | 16/06/2018

1 0
0

Looking for BCom Tuition ?

Find best BCom Tuition in your locality on UrbanPro.

Are you a Tutor or Training Institute?

Join UrbanPro Today to find students near you

Related Questions

Sponsored

Find Best BCom Tuition ?

Find Now »

UrbanPro.com is India's largest network of most trusted tutors and institutes. Over 25 lakh students rely on UrbanPro.com, to fulfill their learning requirements across 1,000+ categories. Using UrbanPro.com, parents, and students can compare multiple Tutors and Institutes and choose the one that best suits their requirements. More than 6.5 lakh verified Tutors and Institutes are helping millions of students every day and growing their tutoring business on UrbanPro.com. Whether you are looking for a tutor to learn mathematics, a German language trainer to brush up your German language skills or an institute to upgrade your IT skills, we have got the best selection of Tutors and Training Institutes for you. Read more