Book-keeping

Book-keeping is an act of keeping written records of the financial transactions of a business. Book-
keeping is primary stage. It involves –
 Identifying the transactions,
 Measuring the identified transactions,
 Recording the measured transactions and
 Classifying the recorded transactions. 
Accounting
Accounting is the process of recording, classifying, summarizing and interpreting the financial
information of a business for decision making. Accounting is the secondary stage. It starts where book-
keeping ends. The basic objectives of accounting are to ascertain financial performance and financial
position and communicate information to the interested parties.
Accountancy
Accountancy refers to systematic knowledge of accounting. It explains 'why to do' and 'how to do' of
various aspects of accounting. It tells us why and how to prepare the books of accounts and how to
summarize the accounting information and communicate it to the interested parties.
Nature of Accounting
-Accounting is a process.
-Accounting is an art.
-Accounting is means and not an end.
-Accounting is an information system.

Qualitative feature of Accounting

-Understandability: The financial statement statements should present information in a manner as to
be readily understandable by the users with reasonable knowledge of business and economic activities.
-Relevance: The financial statements should contain relevant information only. Information which
influences the economic decisions by the users is said to be relevant.
-Reliability : One of the most important among qualitative characteristics of accounting information is
reliability of data, i.e. all information provided must be traceable and verifiable with proper source
documents.
-Comparability : The financial statements should permit both inter-firm and intra-firm comparison. One
essential requirement of comparability is disclosure of financial effect of change in accounting policies.
-Consistency: Consistency means conformity from period to period with unchanging policies and
procedures. Conformity can be achieved be applying the same accounting policies and procedure to
similar events from period to period.

User and Uses of Accounting

Basis of Accounting
The basis of accounting refers to the methodology under which revenues and expenses are
recognized in the financial statements of a business. The cash basis and the accrual basis are the two
primary methods of tracking revenue and expenses in accounting.
-Cash basis of accounting. Under this basis of accounting, a business recognizes revenue when cash is
received, and expenses when bills are paid. This is the easiest approach to recording transactions, and is
widely used by smaller businesses.
-Accrual basis of accounting. Under this basis of accounting, a business recognizes revenue when
earned and expenses when expenditures are consumed. This approach requires a greater knowledge of
accounting, since accruals must be recorded at regular intervals. If a business wants to have its financial
statements audited, it must use the accrual basis of accounting, since auditors will not pass judgment on
financial statements prepared using any other basis of accounting.

Accounting and other Disciplines

Accounting is a dynamic and an applied subject. Even though it is an independent study, it has a
relationship with other subjects.
Accounting and Economics
The relation of Economics with Accounting is very close. Economics is a science related to human
activities to fulfill demand with limited wealth. Economics analyses how people earn and spend, how
purchasers and sellers behave under different circumstances etc. On the other hand; Accounting records
transactions of income and expenditure measurable in terms of money and provides necessary and
relevant information to purchasers and sellers for taking decisions.
Economics studies the behaviors of buyers and sellers as a whole. Accounting provides all required
financial information to individual buyers and sellers for taking an economic decision.
So, these two subjects are interrelated. In this perspective bringing about a synthesis between the
concept of economics and accounting, the concept of social sciences is being applied.
Accounting and Mathematics
Accounting and Mathematics are closely related. Accounting is the language of business. On the other
hand, Mathematics is the language of Accounting. At different stages of accounting addition,
subtraction, multiplication, and division of arithmetic are applied.
Accounting expresses all its transactions and events of financial changes in the language of
mathematics. At all stages of accounting i.e. in preparing journal, ledger, trial balance, and financial
statements mathematical principles are applied.
For this reason, the processes of keeping accounts become easy and short. So, Mathematics is an
indispensable part of Accounting.
Accounting and Statistics
Accounting and Statistics are deeply related. The main object of these two sciences is to make
arithmetical figures understandable and logical and to present these in the form of statements making
them usable to owner, directors or all others concerned. It makes the act of planning and decision-
making easier. The main function of statistics is to collect classify, analyses the quantitative data of
various events and to present them to the individuals or organizations concerned.
For this reason, a statistician presents the data in quite a short form of reports to the individuals or
organization concerned so that they can take a decision depending on this information.
On the other hand, in Accounting after completion of some accounting processes of transactions, final
accounts and financial statements are prepared and on the basis of various information of such financial
statements; the owners and the directors of the organization concerned can take decisions.
Accounting and Law
The prevailing laws of a land control trade and commerce mostly, So, Accounting and Law are closely
related. The accountant and accounts officer must have a clear knowledge of partnership law, company
law, tax law, industrial law, cooperative law, and other relevant laws. Because accounts of an
organization are kept following accepted principles and in accordance with relevant laws.
For example, accounts of every company are kept properly and accurately in the light of company law.
In partnership business accounts are maintained in the light of the partnership act or agreement as the
case may be.
Keeping accounts, auditing of accounts of a company are mandatory as per the specific provision of the
companies act. Similarly, accounts of other organizations are to be kept in accordance with the
provisions of the relevant law. In this context, lawyers are to know the provision of laws relating to
methods of accounting, direction and controlling.
Otherwise, it is impossible on their part to extend their help in settling conflicts and cases properly.
Therefore, both Accounting and Law are closely related subjects.
Accounting and Management
Accounting and Management are very closely related. Because management depends entirely on
accounting for information in financial affairs to make decisions. Accounting provides all kinds of
financial information in project planning and implementation of a business concern. As a result, the
management can take decisions comfortably regarding project planning and implementation.
The scope of Management is extended from individual life to the various field of social life. The overall
development of trading, non-trading, government, semi-government, autonomous bodies etc. depends
on management. In- the modern age the responsibilities of making decisions, planning and management
have been shifted from owners to professional managerial persons.
For this reason, all functions of managers are directed to the development of business concern.
In this respect Accounting helps the management in taking timely decisions, interpreting and analyzing
overall and information – based matters.
Managers cannot take the best and most dynamic course of action for their respective business
concerns without the information based financial statements and other statements of accounts.
As a matter of fact, the success of management fully depends on accounting information.