| Accounting concerns a system providing | | | | determined in conformance with certain |
| qualitative information about finances. It | | | | standards. The financial statements obtained |
| may relate to maintaining of a chronological | | | | will show the income and expenditure for the |
| list of related debits and credits of a | | | | company and present a summary of the assets, |
| business, the statement of transactions and | | | | liabilities and shareholders' or owners' |
| the resulting balance. Accounting methodology | | | | equity in the company on the date of |
| or accounting system is a part of a ledger of | | | | preparation of the accounts. |
| accounts. The methodology of accounting | | | | |
| involves measurement, disclosure or provision | | | | Financial accounting is primarily needed to |
| of assurance about financial information. | | | | reduce the problems which arise under |
| This comes of help for managers, investors, | | | | conditions of incomplete and asymmetric |
| tax authorities and such others who take the | | | | information (wherein one party is better |
| crucial decisions for resource allocation. | | | | informed than the other) when a principal |
| | | | hires an agent. |
| Financial accounting is a branch of | | | | |
| accounting and is often considered to be | | | | The measurements of financial transactions |
| synonymous with accounting. It involves | | | | form the essence of accounting. These are the |
| processes by which financial information | | | | transfers of legal property rights as made |
| related to any business is accounted (i.e. | | | | under contractual relationships. |
| recorded, classified and summarized), | | | | Non-financial transactions are specifically |
| interpreted and communicated. This relates to | | | | excluded from the ambit of accounting. |
| the preparation of financial statements for | | | | |
| decision makers - stockholders, suppliers, | | | | The day to day record keeping involved in |
| banks, government agencies, owners etc. | | | | accounting is called bookkeeping. The |
| | | | double-entry bookkeeping system lies at the |
| In financial accounting the main concerns | | | | core of modern financial accounting. As per |
| taken up are the accounting equation (i.e. | | | | this system at least two entries for every |
| assets equal sum of liabilities and owners' | | | | transaction needs to be made- a debit in one |
| equity) and the financial statements. The | | | | account and a corresponding credit in |
| financial statements are prepared based on | | | | another. The sum of debits should always |
| the trial balance. This trial balance is | | | | equal the sum of credits as a rule. This |
| again prepared using the double entry | | | | makes it easy to check out for errors. |
| accounting system. The figures appearing in | | | | |
| the trial balance are rearranged and a profit | | | | The object of accountancy is to prepare and |
| and loss statement and a balance sheet are | | | | provide accurate financial reports which |
| prepared. | | | | managers, regulators, shareholders, creditors |
| | | | or owners find worthwhile. |
| The format of all these accounts is to be | | | | |