An Introduction To Basic Accounting Principles

Business is an economical activity, and in business lot of “give and take exist” which is termed as “Transaction”. Basically, exchange of goods, services and money between the two parties is called transaction. It is very vital to keep all the records in a very systematic way or in a well manner. The process of recording all the business transaction is called “Book-Keeping”.

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Types of Accounting

• Financial

• Management

• Tax

• Forensic

• Project

• Social

Accounting is a vast and dynamic profession and is constantly adapting itself to the specific and varying needs of its users. Over the past few decades, accounting outsourcing companies has branched out into different types of accounting to cater for the diversity of needs of its users.

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Financial AccountingThe process of recording, summarizing and reporting the myriad of transactions from a business, so as to provide an accurate picture of its financial position and performance. The primary objective of financial accounting is the preparation of financial statements - including the balance sheet, income statement and cash flow statement - that encapsulates the company's operating performance over a particular period, and financial position at a specific point in time.

Management AccountingManagement accounting (also known as managerial or cost accounting) is different from financial accounting, in that it produces reports for a company’s internal stakeholders, as opposed to external stakeholders. The result of management accounting is periodic reports for e.g. the company’s department managers, chief executive officer, etc.

Tax Accounting

Tax accounting is a specialized field of accounting where accountants focus on the preparation of tax returns as well as tax planning for future taxable years.

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Forensic AccountingForensic Accounting is the use of accounting, auditing and investigative techniques in cases of litigation or disputes. Forensic accountants act as expert witnesses in courts of law in civil and criminal disputes that require an assessment of the financial effects of a loss or the detection of a financial fraud

Project AccountingProject accounting differs from standard accounting in that it is designed to monitor the financial progress of a project rather than the overall progress of organizational elements. With Project Accounting, financial reports are specifically created to track the project process. Utilizing Project Accounting provides Project Managers with the ability to accurately assess and monitor project budgets and ensure that the project is proceeding on budget. Project managers can quickly address any cost overruns and revise budgets if necessary.

Social AccountingSocial accounting is a type of accounting that a business performs to place a value on the influence its operations have on society. It requires that enterprises look closely at all that it does and what kind of impact its activities have on people, places, and the environment

Basic accounting overview

• Source Documents

• Debits and credits

• Journals

• General ledger

• Trial Balance

• Financial Statements

If you are not familiar with the basics of general ledger accounts and double-entry accounting, the following overview will give you the bare basics

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Functions of Accounting

• Keeping record of your all business transactions in a systematic manner.

• Protecting and recording all business properties.

• Communicating with all the business parties who are interested in or want to connected with your business.

• Meeting legal requirements.

From the standard accounting definition, the main functions of accounting can be summarized as:

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Branches of Accounting.

• Financial Accounting :- It is basically prepared to identify profitability and financial position of an organization for a specific time period.

• Cost Accounting :- This type of accounting is for recording costs. This is the systematic procedure for identify the unit cost of the product.

• Management Accounting :- This type of accounting system is basically for presentation of accounting information to the higher management for making effective decision.

Objectives of Accounting Outsourcing

• The main aim of accounting outsourcing is to provide suitable information with an aim of safeguarding the interest of business and its proprietors.

• To maintain the record of each and every activity occurred in the business.

• To find out the financial position of the business as a whole.

• To ensure that our accounts are prepared according to the standard level and some concept.

• To fulfill the requirements of the Companies Act, Income Tax Act, etc.

The objectives of accounting outsourcing are to permanently record all business transactions and to show the effect of each transaction and the combined effect of all such transactions for a given period. 

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For Accounts Outsource – Rohit Jain