Management of Accunting
Accounting is the technique that is used to record financial transactions and events. After recording the financial transactions, they are analyzed, summarized, and reported in the financial statements. The main purpose of accounting is to evaluate the growth of the company. Accounting is very useful in showing the economic information of the company. It also assists the investor in deciding on the investment in the company. If the company is making a loss then the investor will not invest in the company but if the company is making profits and giving dividends to the investors then the investors will consider investing in the company. Accounting helps the management in keeping the record of the financial transactions of the company and also helps the management in presenting a fair view of the business. It means that accounting helps the management in providing the relevant information to the interested parties. Accounting also helps in evaluating the liquidity, determining profit or loss, determining financial position of the business and many more.
According to the double-entry system of bookkeeping, every financial transaction must have two effects. These effects must be opposite to one another. It means that if accounts receivable is debited then some other account must be credited. Following are the rules for a double-entry system;
- A transaction has to be recorded in at least two accounts. The reason for this is that if one account is being credited, the other account will have to be debited.
The total assets of the company have to be equal to the capital plus liabilities of the company. It means if the assets of the company are increasing and decreasing, the net effects will not unbalance the equation.