| The term "data" refers to primary details or | | | | with an enterprise. |
| numerical facts relating to an event or transaction. | | | | Management: |
| Data is stored and maintained on a computer or | | | | A small business is generally carried on by the sole |
| network. Computer Software like HiTech Financial | | | | trader or by the partners. But a large business is |
| Accounting process this electronic data. Data is | | | | usually conducted by an incorporated company |
| also maintained as hardcopy or paper print. Since | | | | which separates management from ownership. |
| accounting limits itself only to those transactions | | | | Managers' responsibility is to operate the business |
| and events which are financial in character, | | | | efficiently and maximize the return on capital |
| therefore, accounting data will consist of facts, | | | | without jeopardizing the fund. |
| financial in nature, relating to transactions and | | | | Management needs accounting information in |
| events of a business entity for the accounting | | | | (1) selecting out of alternative proposals; |
| period. Moreover, accounting data must be | | | | (2) controlling acquisition and maintenance of |
| supported by documentary evidence. Thus, | | | | inventories (stock) cash receipts and payments; |
| documents known as vouchers, support the data. | | | | (3) planning or budgeting for the future |
| Usually data is disorganized and disjointed in its | | | | (4) appraising the performance and |
| raw form. It is not capable of being understood. | | | | (5) devising remedial measures for the deviations |
| So, accounting processes raw data into finished | | | | of the actual results from the budgeted targets. |
| form of "information" to make it useful and | | | | Owners: |
| meaningful, capable of being used in decision taking | | | | Although owners initiate in contributing fund to the |
| process by the various users of accounting | | | | business yet they are the last to receive their |
| information. | | | | claim on equity's return on their investment. This |
| Thus accounting data processed by the | | | | is true not only in repaying but also in rewarding |
| accounting cycle produces accounting information. | | | | their capital. After meeting all the charges including |
| Data is collected, recorded, classified, grouped, | | | | employees' salaries and lender's interest profit if |
| valued, tabulated, arranged, summarized in order | | | | any can be distributed as a reward on capital. |
| to present the same in the form of information | | | | Naturally, the owners are interested in the safety |
| for its use by the users to enable them to take | | | | of their capital as also for a reasonable return |
| decisions. | | | | thereon, which rest on the concern' s stability and |
| Accounting data Consists of financial transactions | | | | prosperity. Accounting reports (annual) not only |
| and events relating to an entity for the accounting | | | | appraise the past performance but also assist in |
| period supported by documentary evidence | | | | assessing future prospects of the entity. Such |
| (vouchers). For example receipts and payments | | | | information is also very important for |
| are documented by payee's receipt purchases by | | | | would-be-owners. |
| invoice, sales by outwards invoice, returns inwards | | | | Creditors: |
| by credit note; returns outwards by debit note; | | | | May be short-term viz, suppliers of goods, lenders |
| expenses by bills or payment rolls etc. | | | | of temporary advance or long-terms viz. |
| Thus the first and the most important function of | | | | mortgages, debenture holders etc. Although both |
| accounting is to collect the data supported by the | | | | are interested in the stability and earnings of the |
| vouchers to ensure the authenticity of the same. | | | | debtor firm yet the former specially looks to its |
| Accounting processes consist of recording in the | | | | short-term solvency i.e. liquidity whereas the latter |
| books of original entry (journal or sub- journals); | | | | is interested in long-term solvency of the firm. |
| classifying (posting into ledger) grouping (putting | | | | Government: |
| transactions of similar nature at one place in one | | | | Many products now-a-days are subject to |
| account) valuing (finding the value at year end by | | | | excise-duty and sales Lax. Also the government |
| balancing or valuing) tabulating (preparing list of | | | | regulates the prices of essential goods e.g.. drugs, |
| balances and checking arithmetical accuracy) and | | | | vegetables, oil etc. So the Government is |
| preparing financial statements (Trading and Profit | | | | interested to know the costing information to |
| and loss account; Balance Sheet) in report form | | | | administer excise duties and to regulate the prices |
| to communicate the information. | | | | of products. Government is also interested in the |
| Now-a-days computer accounting software can | | | | accounting information on the profits for income |
| manage this task very efficient in a matter of | | | | tax purposes. |
| short time. Accounting information is presented | | | | Employees: |
| mostly in the form of financial statements like | | | | Steady employment and stability of business go |
| Income statement (Trading and Profit & | | | | together. Again trade unions are interested in |
| Loss account) Position statement (Balance sheet). | | | | sharing the profit of the firm in the form of |
| Now-a-days statement of changes in financial | | | | bonus. Therefore, the employees are naturally |
| position; value added statement; report on Human | | | | interested in the accounting information provided |
| resources accounting; Social performance report | | | | by the annual accounting reports. |
| etc. form part of accounting information | | | | Consumers: |
| Difference between Data and Information | | | | Price-increase is disfavored in almost all the |
| Data | | | | quarters. Accordingly, a producer endeavors to |
| 1. Refers to details, facts about any event. | | | | reduce his product cost as also its selling price. |
| 2. Is, generally, disorganized and disjointed in the | | | | Recently consumer protection associations have |
| form. | | | | been formed to exercise control on the business |
| 3. Is in raw-form and is the input of accounting. | | | | and industry and also to make them aware of |
| 4. Cannot be understood or made use of by the | | | | the "Social responsibility" towards society. Thus |
| users. | | | | consumers also need accounting information. |
| 5. It does not depend upon information. | | | | Researchers: |
| Information | | | | The financial statements, being a mirror of |
| 1. Refers to only those events which are | | | | business conditions are of inestimable value for |
| concerned with entity. | | | | research into business affairs. These statements |
| 2. Is properly arranged, classified and organized. | | | | are therefore of great interest to scholars |
| 3. Is in the finished form and is the output of | | | | undertaking research in accounting theory as well |
| accounting. | | | | as business affairs and practices. |
| 4. Is understood and used by the users of | | | | The nature of business income |
| accounting information for taking their decisions. | | | | One of the main objectives of financial accounting |
| 5. Information is based upon and derived from | | | | is to ascertain whether the business operations |
| data. | | | | have been profitable or not. Accounting enables us |
| Parties interested in accounting information | | | | to find out whether a business has earned profits |
| Accounting information is of interest to various | | | | or suffered losses during the accounting period. |
| persons who are directly or indirectly concerned | | | | |