Fundamentals Of Accounting Explained By Accounting Experts In UK

There are some basic terms that you need to be familiar with before you learn the broader aspects of the subject. These terms are - liabilities, assets, balance sheets, expenses, income statements, cash flow, etc. As accounting is a very vast area of knowledge, there are a lot of things that scholars are required to learn before starting their career as an accounting professional. In this article, we will discuss the fundamentals of accounting.

Core Components Of Accounting

For understanding the true meaning of accounting it is crucial to understand its components. Some major components of accounting are noted below.

Recording

The first step towards understanding accounting is to keep the record of various transactions that are done within the organisation. It is also called book-keeping that is done for keeping track of transactions by recording them. The process of book-keeping can be done through three different techniques - i) having a system that will help in maintaining records. ii) paying attention and tracking financial transactions. iii) combining reports for presenting the final financial reports.

Summarising

After recording transactions, we generally get raw data that is not much important for the firm. Based on those reports, no decision-making task can be carried. Hence, the accountant of the organisation is required to categorise this raw data. So after recording the raw data, it is summarised for using it effectively.

Reporting

The owner of every firm takes quarterly and annual reports of all the operations occurring in the firm that requires money. This report helps them to know the performance of their company.

Analysing

Analysing is the process in which we analyse all the results. One we are done with recording and summarising it is also important to conclude. Management is responsible to keep a check on all positive as well as negative points.

Major Objectives Of Accounting

The prime objectives of accounting are noted below.

Maintaining Records

As well all know that we cannot keep everything recorded in our brain. So with the help of accounting, it is possible to keep a record of every transaction within an organisation.

Utility Of Resources

Resources are very important for the smooth functioning of an organisation. With the help of these records, the organisation can be updated with all activities along with timing. So, the management can easily note the details before spending.

Easy decision making

Based on all the records generated by following accounting procedures help in making the decision-making process easy for the organisation.

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