What is accounting The systematic recording, reporting, and analysis of financial transactions of a business.

The person in charge of accounting is known as an accountant, and this individual is typically required to follow a set of rules and regulations, such as the Generally Accepted Accounting Principles. Accounting allows a company to analyze the financial performance of the business, and look at statistics such as net profit. The meanings of Accounting It depends upon what you are using the word "accounting" in reference to.

If you mean, "What do you do when you do accounting?" then the answer is: Accounting is a method or system used to keep track of and determine the financial status of a person or company's income/assets and outlay of money/possessions. (An Accountant engages in Accounting: "The occupation of maintaining and auditing records and preparing financial reports for a business" - from thefreedictionary.com.) If you mean, "What does it mean that I have to have keep an accounting of what I'm doing?," then it means that you have to keep a record (usually written) of whatever you do.

There are various other variations in meaning, but they are basically related to the above two meanings.

- Accounting is the "language" of business, it provides a range useful information to management and other interested parties.

- Accounting is the process of recording, analyzing, and interpreting financial activities of a business. Financial records are made (e.g. balance sheets) to assist managers in making business decisions. The following are the main objectives of accounting: To keep systematic records: Accounting is done to keep a systematic record of financial transactions. In the absence of accounting there would have been terrific burden on human memory which in most cases would have been impossible to bear.

To protect business properties: Accounting provides protection to business properties from unjustified and unwarranted us. This is possible on account of accounting supplying the information to the manager or the proprietor.

To ascertain the operational profit or loss:

Accounting helps is ascertaining the net profit earned or loss suffered on account of carrying the business. This is done by keeping a proper record of revenues and expenses of a particular period. The profit and loss account is prepared at the end of a period and if the amount of revenue for the period is more than the expenditure incurred in earning that revenue, there is said to be a profit. In case the expenditure exceeds the revenue, there is said to be a loss.

To ascertain the financial position of business: The profit and loss account gives the amount of profit or loss made by the business during a particular period. However, it is not enough. The businessman must know about his financial position i.e., where he stands; what he owes and what he owns? This objective is served by the balance sheet or position statement.

To facilitate rational decision making: Accounting these days has taken upon itself the task of collection, analysis and reporting of information at the required points of time to the required levels of authority in order to facilitate rational decision making.

Effective Accounting Information Systems: Decentralization Control and Compatibility

The use of responsibility accounting An accounting information system is a process that mimics the needs and requirements of the company using it. Small companies tend to have small accounting information systems while large, complex companies will have large, complex accounting information systems. Decentralization is a process where companies strengthen their accounting information system through the use of responsibility accounting and responsibility centers. Control and compatibility are two other features that help and create effective System.

Accounting systems use decentralization to place specific activities under those individuals who can best control and complete each task. Revenue generation and cost controls are two common activities placed under specific job positions in responsibility accounting. This decentralized approach insures that a company uses the right person to supervise and control each activity within the organization. The keys to decentralization is to cede authority the ability to direct employees on given accounting tasks on

multiple individuals and place responsibility, which holds each individual using authority in control and under the companys greater mission, at multiple levels. Spreadsheets Spreadsheets are computer software programs which allow users to enter information in a series of numbered or lettered columns and rows. The computer spreadsheet mirror paper spreadsheets which consist of crosshatched lines that create a sheet with many square or rectangular boxes. Computerized spreadsheets are advantageous since data in any box can be readily altered and copied or pasted quickly; such operations would take minutes or hours by hand on paper. Step of how use a spreadsheet in accounting Data Organization The primary purpose of a spreadsheet is to organize and store data, especially numerical data, such as financial, mathematical, or scientific information. Spreadsheets are used extensively in accounting and financial services for their ability to quickly and accurately organize data. Typically, to organize data row and/or column titles are entered in the first cell of a row or column to identify the numbers in each individual cell. Calculations Another use for computer spreadsheet programs is performing calculations on data entered into the program's cells. Many spreadsheet programs allow users to apply a certain mathematical formula to a cell and display the result in a different specified cell. Microsoft Excel, the most commonly used spreadsheet program in business and finance, allows the user to make references to other cells within the program, which allows for a given calculation to be applied to many cells down column or across a row to be carried out automatically. Performing such mass calculations by hand would require more time. Graphs Spreadsheet programs are also useful for their ability to display data in graphical form. At business meetings or when explaining numbers to someone who is not mathematically inclined, visual representations of data in the form of pie charts, histograms or other graphics can be very useful. Spread sheet programs like Excel can quickly convert cells of data into a graph which represents the numbers selected, which can be copied to word processing documents and emailed or printed out for presentations. An integrated accounting system uses affordable and easy-to-use software. Even small businesses can purchase such a system, which includes many functions and features designed to be compatible with each other. An integrated system often includes accounts payable, receivable, fixed assets and an inventory management module -- all connected to each other and to the general ledger.

Significance The main feature of an integrated accounting system is that information is entered once and is shared with other modules, including the general ledger. One single information database is used and accessed by all applications. This level of efficiency cannot be achieved by a system that is not integrated, where the same data may need to be entered repeatedly in different modules. For instance, if you use a nonintegrated accounts payable module, you need to enter journal entries in the general ledger to recognize changes in cash, expenses and accounts payable, a huge burden to any accounting department. Types Integrated systems can be designed for specific industries, such as manufacturing, where the cost accounting module is integrated with the general ledger and allows for easy transfer of information between the two programs. Sometimes programs are purchased separately, and they are integrated later. Large firms often develop customized systems in-house, which are more expensive but work very well with in-house customer service and support. Benefits The main benefit of an integrated accounting system is the increase in efficiency. For instance, when a sale is made, inventory is decreased automatically along with the recognition of the sale in the general ledger. There is no need for manual intervention or a second step in this process -- all is done at the same time by the integrated system, a level of efficiency only available with this type of software. Considerations When reviewing integrated accounting systems, look for long-term solutions for your business. For instance, if you plan on selling online or retail, be sure the system you select can accommodate these needs later with no major problems. Furthermore, consider the long-term costs of such a system, including new versions and staff training. If you purchase a system and don't get its new versions with new functionalities and updates, you may be missing opportunities for efficiencies in your business. Differences Between Manual & Computerized Accounting Systems Accounting is an intrinsic part of any business, large or small--owners and other interested parties want to know whether they are making a profit or not. Many small businesses do their accounting manually and they are happy with this setup. Others may be considering using a computerized system, since accounting software is so affordable these days. Manual and computerized accounting systems perform basically the same processes; the accounting principles and concepts are the same with differences lying in the mechanics of the process.

Speed The main difference between manual and computerized systems is speed. Accounting software processes data and creates reports much faster than manual systems. Calculations are done automatically in software programs, minimizing errors and increasing efficiency. Once data is input, you can create reports literally by pressing a button in a computerized system.

Cost Another difference between manual and computerized systems is cost. Manual accounting with paper and pencil is much cheaper than a computerized system, which requires a machine and software. Other expenses associated with accounting software include training and program maintenance. Expenses can add up fast with costs for printers, paper, ink and other supplies.

Backup A third difference between manual and computerized systems is the ease of backup of a computerized system. All transactions can be saved and backed up, in case of fire or other mishap. You cannot do this with paper records, unless you make copies of all pages--a long and inefficient process.

Special Journals Entering transactions in the general journal and posting them to the correct general ledger accounts is time consuming. In the general journal, a simple transaction requires three linestwo to list the accounts and one to describe the transaction. The transaction must then be posted to each general ledger account. If the transaction affects a control account, the posting must be done twiceonce to the subsidiary ledger account and once to the controlling general ledger account. To speed up this process, companies use special journals to record repetitive transactions that affect the same set of accounts and have a consistent description. Such transactions can be documented on one line in a special journal. Then, instead of separately posting individual entries, each column's total is posted at the end of the accounting period. Although companies create special journals for other types of repetitive transactions, almost all merchandising companies use special journals for sales, purchases, cash receipts, and cash disbursements.

Generally special journal goal is to provide a result in faster way and make it uniform in all of the copies to be made.

Sales Journal. The sales journal lists all credit sales made to customers. Sales returns and cash sales are not recorded in this journal. Entries in the sales journal typically include the date, invoice number, customer name, and amount. Invoices are the source documents that provide this information. In its most basic form, a sales journal has only one column for recording transaction amounts. Each entry increases (debits) accounts receivable and increases (credits) sales. Many companies use a multi-column (columnar) sales journal that provides separate columns for

specific sales accounts and for sales tax payable. Each line in a multi-column journal must contain equal debits and credits. For example, the entries in the sales journal to the right appear below in a multicolumn sales journal that tracks hardware sales, plumbing sales, wire sales, and sales tax payable. Individual entries are still posted daily to the accounts receivable subsidiary ledger accounts, and each column total is posted at the end of the accounting period to the appropriate general ledger account.

This journal focuses on transactions in the customer. Clearly this is for customers informations in their credit and debit accounts. Cash receipts journal. Transactions that increase cash are recorded in a multi-column cash receipts journal. If sales discounts are offered to customers, the journal includes a separate debit column for sales discounts. Credit columns for accounts receivable and for sales are normally present, but companies that frequently receive cash from other, specific sources use additional columns to record those types of cash receipts. In addition, the cash receipts journal includes a column named Other, which is used to record various types of cash receipts that occur infrequently and therefore do not warrant a separate column. For example, cash receipts from capital investments, bank loans, and interest revenues are generally recorded in the Other column. However, a company that provides consumer loans and receives interest payments from many customers would probably include a separate column for interest revenue. Whenever a credit entry affects accounts receivable or appears in the Other column, the specific account is identified in the column named Account. Accounts receivable payments are posted daily to the individual subsidiary ledger accounts, and customer account numbers (or check marks if the customer accounts are not numbered) are placed in the cash receipts journal's reference column. At the end of the accounting period, each column total is posted to the general ledger account listed at the top of the column, and the account number is placed in parentheses below the total. Entries in the Other column are posted individually to the general ledger accounts affected, and the account numbers are placed in the cash receipts journal's reference column. A capital X is placed below the Othercolumn to indicate that the column total cannot be posted to a general ledger account.

Cash receipt journal is a journal for cash either the customer had credit or debit his/her accounts. ACCOUNTS RECEIVABLE LEDGER The accounts receivable ledger is a sub ledger in which you record all credit sales made by a business. It is useful for segregating into one location a record of the all amounts invoiced to customers, as well as all credit memos issued to them, and all payments made against invoices by them. The ending balance of the accounts receivable ledger equals the aggregate amount of unpaid accounts receivable. A typical transaction entered into the accounts receivable ledger will record an account receivable, followed at a later date by a payment transaction from a customer that eliminates the account receivable. If you were to maintain a manual record of the accounts receivable ledger, it could contain substantially more information. The data fields in a manually-prepared ledger might include the following information for each transaction: Invoice date Invoice number Customer name Sales tax Total amount billed Payment flag (states whether paid or not)

The primary documentitem sold in the accounts receivable ledger is the customer invoice. Also, if Identifying code for recorded you grant a credit back to a customer for such items as returned goods or items damaged in transit, then you also record a credit memo in the ledger.

The information in the accounts receivable ledger is aggregated periodically and posted to an account in the general ledger, which is known as a control account. The accounts receivable ledger control account is used to keep from cluttering up the general ledger with the massive amount of information that is typically stored in the accounts receivable ledger. Immediately after posting, the balance in the control account should match the balance in the accounts receivable ledger. Since no detailed transactions are stored in the control account, anyone wanting to research customer invoice and credit memo transactions will have to drill down from the control account to the accounts receivable ledger to find them. Before closing the books and generating financial statements at the end of an accounting period, you must complete all entries in the accounts receivable ledger, close the ledger for that period, and post the totals from the accounts receivable ledger to the general ledger. Similar Terms The accounts receivable ledger is also known as the accounts receivable sub ledger or accounts receivable subaccount.

Account receivable ledger is use to present all the credit of an specific business to be able to track down all of there payables. Control Account A control account is a summary-level account in the general ledger that contains aggregated totals for transactions that are individually stored in subsidiary-level ledger accounts. Control accounts are most commonly used for accounts receivable and accounts payable, since these areas contain a large volume of transactions, and so need to be separated into subsidiary ledgers, rather than cluttering up the general ledger with too much information. The balance in a control account should match the total for a

subsidiary ledger. If the balance does not match, it is possible that a journal entry was made to the control account that was not also made in the subsidiary ledger. A ledger is a book or database in which double-entry accounting transactions are stored or summarized. A subsidiary ledger is a ledger designed for the storage of specific types of accounting transactions. The information in a subsidiary ledger is then summarized and posted to an account in the general ledger, which in turn is used to construct the financial statements of a company. The account in the general ledger where this summarized information is stored is called a control account. Most accounts in the general ledger are not control accounts; instead, transactions are recorded directly into them. A subsidiary ledger can be set up for virtually any general ledger account. However, they are usually only created for areas in which there are high transaction volumes, which limits their use to a few areas. Examples of subsidiary ledgers are: Accounts payable ledger Accounts receivable ledger Fixed assets ledger Inventory ledger Purchases ledger Subsidiary ledgers are used when there is a large amount of transaction information that would clutter up the general ledger. This situation typically arises in companies with significant sales volume. Thus, there is no need for a subsidiary ledger in a small company.

Accounting Software Screenshots