What is accounting? by Account-Ease

 

Accounting is quite simply a tool allowing:

 

·    To establish at a given moment a photograph of the company

·    To take stock of a given period

·    To perform projections

·    To do this, the accounting is obviously based on figures, but not just any… and not just any old how.

Indeed, if we are talking about accounting journals, for example, it is indeed because we are supposed to enter data regularly in these documents.

The accounting is a fairly general concept.

It designates the entire process of receiving accounting elements, their classification, their recording, the calculation of the various balances and accounting results, up to the establishment of standard accounting documents.

 

It is a practical discipline which forms the basis of all management tools.

 

Accounting is in fact a tool which makes it possible to identify, analyze and communicate information relating to the economic activity of an organization as well as to its assets.

 

Accounting data is expressed in the form of figures, sometimes in quantities but more often in the form of monetary value. All records must be dated precisely.

Types of Accounting:

 

There are two main categories of accounting for companies:

 

·    General accounting (mainly intended for external actors)

·    Cost accounting (mainly intended for internal analysis)

If the keeping of general accounts is compulsory, the keeping of cost accounts is not.

 

It is however very useful to the company to know its costs and to analyze its profitability. These two types of accounting are complementary.

 

In UK, the keeping of accounts is framed by law and obeys strict accounting principles.

Objectives and Benefits of accounting:

 

Keeping accounts allows you to:

 

·    Know in real time the financial situation of the company

·    Identify the amount and origin of the company's economic results

·    Decision-making aid, allows to justify the decisions taken

·    Track the cash in the cash register, inflows, outflows, available amounts

·    Identify the assets of the company, its various assets and financing

Single-entry and Double-entry Accounting:

 

There are two systems for recording accounting entries.

 

Double entry accounting: any transaction is recorded on two accounts at the same time.

Single-entry accounting: a transaction is recorded on a single account.

In single part accounting, less used, the balance between expenditure and income is calculated, and it is this balance that is entered.

 

There are therefore two columns, one to describe the transaction and one to indicate the quantified amount, positive or negative where applicable.

 

In double-entry accounting, the system generally used, the recording of a transaction is made both to the credit of one account and to the debit of another account, for the same amount.

 

The entry is made in a credited account and in a debited account.

Accounting as a Management Tool:

It is by relying on accounting, and therefore on past elements of the company, that it is possible to carry out management and especially forecasting management. There is even an established term which is “management accounting”.

 By closely studying the accounts of an organization, it is possible to extract data that will then be processed in cost accounting. In this way, it is thus possible to make forecasts, forecasts of activity and to determine a set of useful indicators in management. We therefore rely directly on the accounting treatment and the initial classification to construct strategies, analyze costs, etc.

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