Accounting is the process of recording, summarizing, and analyzing financial transactions of a business.

• Accounting involves recording financial transactions such as sales, purchases, and expenses.

• It i...read more

Accounting is the art of recording, classifying, summarising and analyzing business transactions and interpreting the results thereof. In accounting, only those transactions and events are recorded which can be measured in terms of money.

The basic objective of accounting is to provide the desired information to the owner as well as to all other interested parties i.e. investors, creditors, employees, financial institutions, government etc.

In short, we can say that accounting is the language of business by which all the financial and other information are communicated to various interested parties.

Following are the characteristics of accounting:

• Accounting is an art which it helps us in attaining our aim of ascertaining the financial results, that is, operating profit and financial position. Analysis and interpretation of financial data require special knowledge, experience and judgement.
  

• In accounting the financial transactions are recorded in the Journal. With the help of Journal, the recorded data are classified into ledger under appropriate heads. Then with the help of ledger the trial balance and financial statements are prepared.
  

• It records only those transactions and events which are of financial character: If a transaction has no financial character then it will not be measured in terms of money and not recorded.
  

• It records transactions in terms of money. All transactions are recorded in terms of common measure i.e. money.
  

• On account of recording of business transactions in a systematic manner, it is also called a science. First the business transactions are recorded in the primary books i.e. Journal, for classification the ledger is prepared.