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Three important words used in Accounts field

The three very important words used in Accounts field are:

  • Accounting
  • Accountancy
  • Accounts


Accounting is an art of:

  • Recording, Classifying, Summarizing
  • The transaction and events
  • Which are of a financial nature (at least in part)
  • In a Significant manner
  • To analyze, interpret and communicate the results to the users

Procedural aspects (Process) of Accounting


Recording : Business transactions and events in a systematic way in Journal etc.

Classifying Z : G
rouping the transactions of same nature at one place. by preparing appropriate accounts in Ledger. For example, all transactions relating to Ram would be recorded in the Ram Account. and so an.

Summarizing : I
nvolves the preparation of financial statements i.e. Trial Profit and Loss Account; Balance Sheet and Cash Flow Statement.

Analyzing : 
Methodical classification of the data given in the financial statements.

Interpreting : 
Is concerned with explaining the meaning and significance of the relationship as established by the analysis of accounting data.

Communicating : Is concerned with the transmission of summarized, analyzed and interpreted information to the end users to enable them to make balanced decisions.

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