Page 99 - Office Practice and Accounting -9

Accounting is concerned with recording, classifying, summarizing the recorded data,
analyzing and interpreting financial transactions and communicating the results
thereof to the internal and external users. Accounting can be defined as science and
art. It is a science because it has some definite objectives to be fulfilled and it is an art
because it prescribes the process through which the objective can be achieved. Non-
financial transactions are not recorded in accounting, i.e. only transactions of financial
nature are the subject matter of accounting. In other words, only those transactions
which are expressed in terms of money are recorded. When financial transactions are
recorded in primary books i.e. journal or subsidiary book, they are to be classified
by grouping the transactions or entries of similar nature at one place. This is done
by opening in a book called ledger. Ledgers are summarized in order to give useful
information to management or other interested parties. This is done by preparing
Trial Balance, Trading and Profit and Loss Account. And to reveal the whole financial
position of the organization, Balance Sheet is prepared. This is done to interpret the
results of the financial transactions and communicating the results.

American Accounting Association (AAA): "Accounting is the process of
identifying, measuring and communicating economic information to permit
informed judgments and decisions by users of the information."

Thus, we can conclude that accounting is the art of recording, classifying and
summarizing of financial transactions in a significant manner and interpreting the
results thereof.

Types of Accounting
Accounting can be divided into three types:
1. Management Accounting 2. Financial Accounting 3. Cost Accounting

Management Accounting

Management accounting is a newly developed accounting discipline. It provides
accounting information to management for planning, decision making and
controlling. Current position and performance are necessary for the organization.
Management accounting provides necessary information for managerial decision
making: by applying different statistical tools like graphs, diagram, index number
etc. It provides the pictures of efficiency, performance and development of previous
action plan. Planning, organizing, directing, staffing, controlling is regular function
of management. Management account is so popular in modern business, because it
provides information to the decision makers.

Office Practice and Accounting 9 95