Accounting is a branch of management science that is concerned with the recording of financial transactions, which are meant to represent the financial responsibilities and assets of an entity. Accounting provides information necessary for decision making. There are many types of accounting systems available such as internal bookkeeping, the balancing of cash flows, the measurement of assets and liabilities, and the preparation of reports. All of these methods are used to ensure that accounting processes are conducted in a timely and effective manner to meet the needs of organizational stakeholders.
The basic function of accounting is to record the financial performance of a company. This includes the assessment of the costs of assets and liabilities, transfer of assets from one category to another, allocation of resources, and allocation of profits and losses between the different business transactions. Accounting is usually used to represent the financial position of a company. Financial accounting aims at providing decision makers with information relevant to make sound financial decisions. The main objective of managerial accounting is to provide information to the owners and key management about the state of the company’s financial performance.
A major part of the responsibility of an accountant is to perform and oversee the preparation and audit of accounts. The scope of responsibilities includes approving of the accounting policies, maintaining accurate records, analyzing the results of accounting transactions, and reporting the results of accounting transactions to the business transactions owners and investors. The duties of an accountant also include developing accounting proposals, analyzing the data obtained, preparing the financial statements, and interpreting the financial statements. An accountant has to make recommendations to management regarding changes in the policies, procedures, and measures, and update the management regarding any changes in the business transactions.
A typical day of accounting involves entering and updating data in the financial statements of the company, preparing reports based on the information entered, communicating the reports to owners, managers, and shareholders, and finally submitting the financial statements to the tax authorities for filing purposes. Entry and verification of accounting transactions is done through the use of ledgers, journals, computer systems, and manual ledgers. Accounting ledgers are used to record daily inventory and asset inventories as well as to maintain and track customer records. The recording of financial transactions is usually completed on either an inter-office or local level. Some firms use computer software applications to facilitate the entry and recording of accounting transactions.
There are two basic accounting methods, namely the managerial accounting method and the bookkeeping method. Managerial accounting involves the process of creating and tracking financial transactions as well as the preparation of accounting reports. The main objective of managerial accounting is to provide information to the owners and key management about the condition of the company’s financial performance. This type of accounting is usually performed by an accountant who is authorized to create reports required by the company or to audit the financial records of the organization.
A bookkeeper is an additional member of the accounting staff. He is responsible for recording all financial transactions, tracking the daily cash flows, and preparing the final financial statements. Bookkeepers must have solid accounting skills and knowledge in managing data, using computer software, budgeting, and time management. Some bookkeepers are promoted to become managers once they have mastered the basic accounting skills.