Accounting is the systematic process, accounting data analysis, and communication of fiscal and non-financial information about organizations including corporations and businesses. The word accounting comes from the Latin verb atting to, “to manage,” and therefore, accounts means “accounts.” There are various methods used in accounting which are objective, subjective, or mixed methods. Objective accounting measures all events and transactions that are directly related to the business. Subjective accounting measures all events and transactions that are indirectly related to the business but which are not determinants of the value of a business. gvcpas.com
Why need Accounting?
In order to ensure the accuracy and validity of financial statements, accounting procedures are employed. These procedures include the generation of estimates, testing financial statements, reporting of results of operations and the identification of relevant trends, making recommendations concerning management of internal controls. Accounting policies are based on principles, rules, and guidelines prescribed by accounting standards bodies. The policies must comply with applicable laws, including those governing corporate taxation. In order to comply with accounting policies, accounting specialists must regularly update and review accounting reports and accounting policies.
The purpose of an income statement is to provide an accounting summary of the financial condition and performance of an entity for the year ended at the end of the particular year covered by the financial statements. The income statement also includes balance sheet reports, which show the balances of the different assets and liabilities and are usually presented in the same way as business financial statements. The difference between an income statement and a business financial statement is that an income statement gives information directly related to cash flows rather than accounting estimates. Accounting estimates may be made using information obtained through the resource planning and forecasting department. In order to prepare financial statements, accounting professionals must understand and document all of an organization’s financial processes and reporting period of accomplishment, assess the extent of accounting liabilities and control, prepare the income statement, draw the net amount of cash from the current assets and liabilities and generate the income statement and other related financial documents.