Accounting is the management of the transactions and records which can also be done through the book-keeping method. Accounting is a very wider term and the book-keeping is the part of accounting matter. Accounting does classify and analyze the financial transactions.
Characteristics of Accounting
Relates Only to the Financial Transactions
Accounting relates only to the financial transactions. Non-monetary transactions as conflict between labors and management, any claim of compensation etc… will not be recorded in accounting.
Art of Recording Transactions
Accounting is an art of recording business transaction in the form of books of account maintained as per specific rules and principles.
Process of Classifying Transactions
Accounting is the process of classifying business transactions. The transaction relation a particular nature are grouped at a place or in a separate account. For example, all the transactions relating cash are recorded in cash account. Similarly, the transactions relating sales will be shown in sales account.
Art of Summarizing Transactions
Accounting is also the art of summarizing all business transactions. It involves the act of balancing ledger accounts, preparing trail balance and finally preparation of final accounts. The purpose of preparing final accounts is to disclose a view of profit or loss and financial position of the business of a specific time.
Analyses and Interprets the Financial Data
Another feature of accounting is to analyze and interpret the financial data to compare such results with that of the previous year. Such interpreted results are communicated to the concern parties as proprietors creditors, government etc…