Baskadia

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Introduction to Accounting

History of Accounting : a

The history of accounting can be traced to the down of commerce ,with evidence to prove that accounting existed as early as 2600 B.C . The barter system was the begning as "Exchange" is the basis of accounting , with the money economy talking shape credit transaction required some method of recording .

With the grouth of trade and commerce accounting grew in importantce . Between the years 1350 and 1450 , a systematic method of account - keeping had developed in Geneva and Venice .

In India, kautilya,s Arthashastra , written during the 4th century B.C. , not only described political and economic but also explained the art and science of account - keeping kautilya has devoted an entire chapter to the business of keeping accounts in the office of an accounting , using shloks or sanskirt verses , the Arthashastra offers details on accounting -keeping , an account's office supervision methods , checking of accounts distinction between capital and revenue, profits and expenses and so on .

Meaning of Accounting

The American institute of Certified public Accounting (AICPA) defines accounting as " The art of recording classifying and Summarising in a Signification manner and in terms of money, transactions and events which are in part at leat , of financial character and interpreting the results there of

Accounting is defined as the process of identifying , measuring , recording and communicating the required information relating to the economic events of an organisation to the interested users of such information.

Characteristics of Accounting Information

the validity of accounting information which enhances its understandability and usefulness , are based on relevance, Understandability and comparability.

Reliabillity

The reliability of accounting information is the degree of correspondence between the information conveyed about the transaction and the information displayed . Reliable information should be free from errors and biases . It should faithfully represent what it is meant to , To ensure this, the information disclosed must be credible and verifiable by independent parties.

Relevance

To be relevant information must be available on time . It must help in predication and feedback and it must influence the decisions of users by confirming or correcting their pat evalutions .

Understandabillity

Decision makers should be able to interpret accounting information in the same sense as it is prepared and conveyed to them . A massage is said to be effectively communicated when it is interpreted by the receiver in the same sense in which the sender has sent it . Accountants should present information in the most intelligible manner without sacrificing relevance and reliabilty.

Comparability

Users of financial reports should be able to compare various aspects of an entity over different periods and also with other entities . To be comparable, accounting reporting must belong to a common period and should use a common unit of measurement and format of reporting .