Accounting is the process of recording, summarizing, analyzing, and reporting financial transactions of a business to provide useful information for decision-making.
- It serves as a language of business, helping stakeholders understand the financial health and performance of an organization.
Branches of Accounting:
- Financial Accounting
- Cost Accounting
- Management Accounting
Meaning of Financial Accounting:
Financial Accounting is the process of identifying, measuring, and communicating financial information to the users of such information.
- It shows the day to day transactions.
- It aims to ascertain profit and loss through profit and loss account.
- It also shows the financial position of a business through balance sheet.
- It is historical in nature.
- It is the oldest branch of accounting.
Objectives of Financial Accounting:
- To record the financial transactions of a business systematically and scientifically.
- To disclose the result of operation i.e. profit earn or loss suffered.
- It aims to reveal the financial position of a business through balance sheet.
- It aims to ascertain profit and loss through profit and loss account.
Limitations of Financial Accounting:
- It does not provide adequate information for fixation of selling price of the products or services.
- It does not provide proper system to control cost.
- It does not classify costs into different categories such as direct and indirect, fixed and variable.
