Accountancy is the process of communicating financial information about a business entity to users such as shareholders and managers.

INTRODUCTION OF ACCOUNTANCY

 The principles of accountancy are applied to business entities in three divisions of practical art, named accounting, bookkeeping, and auditing.[3] The American Institute of Certified Public Accountants (AICPA) defines accountancy as "the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof."[4]

 Starting a business often requires entrepreneurs to understand and complete a variety of business functions. An important business function when starting a small business is accounting. Although many entrepreneurs may be fearful of dredging through endless stacks of financial documents, accounting often provides entrepreneurs with the clearest picture of their business success. Entrepreneurs must also keep copious amounts of records regarding the small business startup for tax and legal purposes.

Why Is Accounting Important for Business? Accounting is important for businesses for several reasons. Effective record keeping helps a business survive efficiently all the while keeping track of the operations of the company.

 Function The primary function of accounting is to record the transactions of a company; incoming and outgoing cash needs to be recorded. Financial Statements Accurate accounting records help to prepare financial statements. Financial statements help to secure investors and, thus, working capital.

 Taxes Having accurate accounting records helps to prepare the company's yearly tax returns quickly and efficiently. Paying the proper taxes is important to a business; hefty penalties can apply if the taxes are not calculated properly. Tracking Expenses Accounting helps to track expenses for a company. They can reveal where too much money is being spent or if not enough is being spent in a particular area of the business. Order Accounting helps to keep the business records in order. Keeping a business organized is key to being successful

 What is Accounting? What is the Importance of Accounting? Why do we need accounting? Accounting is very much connected with our personal lives in so far as it is in respect of every business. We all with intent or unknowingly generate accounting ideas in a way when we plan what we will do with money. We need to plan how much money will be spent whilst how much of it will be kept back. What is through this activity is a budget gets prepared. And we all are familiar with this concept - which is universally acceptable, that money must be spent cautiously. The same is true of a business. It is therefore imperative for a business to know about the inflow and out flow of economic resources and their results. Thus, accounting is the very need of a business to provide the information which is useful for sound economic decision making process and owing to the diversification between ownership and management.

 Being known as The Language of business, accounting is the basic need of a business organization to find out where it stands. It is of great essence to provide the basis for planning and budgeting while dealing with measurement of economic activities and communicating financial information to the users for decision making. Accounting is also meant for protecting the properties of business and communicating the results obtained from the financial statements to the intended parties like share holders, debtors, creditors, and investors while meeting the legal requirements. Accounting is included in those fields that are growing faster in this era. It is dynamic at the present time and meets the growing demands of trade, commerce and industry. It is appropriate to mention here that the advent of industrial revolution and technological advancements have given rise to widen more business prospects at the same time as bringing about change in the domain of accounting by which it has now begun to be known as a tool of management for planning and controlling process. Thus, it can be rightly said, in the present day and age, no economic activity can be carried out successfully with no thought of accounting.

According to American accounting association, accounting has been defined as, The process of identifying, measuring, and communicating information to permit judgment and decision by the users. Yet another definition of American Institute of Certified Public Accountants (AICPA) is that Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character and interpreting the results thereof. Accounting entails recording, classifying and summarizing of business transactions. It is a process of identification, measurement and communication of economic information involving four interconnected phases. They are outlined herein: At the outset, the first phase is meant to record the economic events or transactions -depending upon their occurrences, chronologically in the books of accounts - called journals. This process is known as journalizing. Next comes the phase of ledger-posting: It is the process by which all the transactions are synthesized account-wise so that the accumulated balance of each of those accounts can be determined. The process of ledger posting is vitally important as it helps in ascertaining the net effect of various transactions during a given period. The subsequent stage is preparing the trial balance which involves the arrangement of all ledger accounts having been aggregated into debit and credit balances. This activity enables to check and confirm whether the total of debits is equal to that of credits. Finally, comes the phase of preparing financial statements. This phase is meant for finalization of accounts by measuring profit & loss account and preparing Balance Sheet- at the end of accounting period.

 Every business needs to have two prime objectives, such as, to earn profit and to remain solvent and the information in relation to these objectives while ensuring whether they are being accomplished is provided by accounting. Accounting is important in the sense that it enables a business house to maintain complete and orderly prepared records of economic events by way of preparing books while facilitating the information for various purposes. Furthermore it helps to ascertain the net results in terms of profit or loss (Income Statement) and providing the information about financial position of the business (Balance Sheet) to the owners of a business relating to what the entity owns in the form of assets and what it owes in the form of liabilities at a particular point of time. Accounting information is valuable to the concerned managers too so as to ensure whether the business entity is being directed as it should be, and simultaneously it is a means to provide the information to the investors to find out the future prospects of business. It is also useful for the employees and customers in order to know the condition of the business entity.

 Accounting is the basis and of a great assistance to management for planning, controlling and decision making process. It is with the help of accounting information that the performance of an entity can be appraised, at the same time as, its methodical records make possible to eliminate the frauds and the thefts. Furthermore, being concerned primarily with the creation of financial information for its users, accounting provides useful information for ascertaining the effectiveness and efficiency of a business. Hence, accounting is must for every business. Exclusive of accounting leads to create chaos and discrepancies in business transactions.

 Accounting ought to be there for a business to run with accuracy, efficiency and effectiveness in terms of overall economic activities and their results. Accounting helps the management in planning and decision making process. There is no replacement of sincere and talented accountants, nor of their capabilities, nor of their diligence because their services offered in keeping track of every single one economic event while protecting entire business properties are so strong and efficient that the need of even highly paid bodyguards of businessmen is eclipsed. As it goes in the words of Elvis Presley, I don't have any use for bodyguards, but I do have a specific use for two highly trained certified public accountants.

 Finance in the business is like the blood in the body. Just as the body needs proper blood supply to be healthy and fit to work properly so does a business need funds to run successfully and to stand prosperously. It can be rightly said that providing funds to the business as and when needed is the key to success of a business. Nonetheless, the significance of Financial Management is not limited to providing of funds only. In fact, there is a range of other important tasks of Financial Management including the maximization of wealth and maximization of overall value of business. But in this context, we would confine our attention to finance function relating to current assets.

 Finance is very much concerned with economic as well as the effective utilization of funds. It focuses on the arrangement of funds at the right time in order to carry out the activities and to achieve the determined tasks satisfactorily. Financial management plays an important role because on account of which the liquidity position of a business is affected. The term liquidity means the ability of an organization to pay its current liabilities as they come due. It emphasizes the effective utilization as well as effective management of cash. If sufficient funds are available at the right time then only a business can clear its short term debts as well as it can maintain its operations effectively. This gives rise to know the concept of working capital and working capital management.

 The term working capital is used for day- to-day requirement of funds for a business. In other words, a business needs certain amount of cash for meeting routine payments, providing unforeseen events or purchasing raw materials for its production. The concept of working capital should be easily understandable to us since it is very much related to our personal lives as well. In the sense, we need to maintain sufficient funds for our cost of living. We would like to collect the cash which is owed to us by others, and at the same time we would like to pay the cash whom we owe. If we do not maintain our ready money properly and we fail to do so, we generally call the situation as bankruptcy or insolvency. The same applies to a business and the task of financial management in terms of working capital is to maintain sufficient funds for its day-to-day requirements while safeguarding the business against the possibility of insolvency. Thus the term working capital refers to the excess of the current assets over the current liabilities.

 Current assets can be defined as being those that will be converted in to cash in twelve months period. They are: Cash, Receivables, inventories, marketable securities and prepayments. Current liabilities are those that are to be settled in twelve months period. Current liabilities are: Accounts payable, unearned revenues and wages payable. Cash is the king - despite the fact that it has its own costs. Cash is the most liquid asset to be presented on the balance sheet commonly as the first item. Management of cash is of great importance for a company. If adequate cash is not available as and when it is needed, the situation leads to bankruptcy. Management of cash and liquidity involves providing sufficient funds to the business for meeting the requirement of cash at the right time. It involves several reasons. Just to name a few, repayment of bank loans, payment of taxes, payment of wages, purchases of raw materials and inventory etc. Moreover, holding the cash entails a precautionary motive in order to meet unforeseen events. Therefore, the cash must be managed properly and be provided for arising contingencies.

 Apart from these, cash management also involves speeding cash inflows and slowing cash outflows. The former case indicates collection of cash payments as soon as they come due for collection while the latter indicates the payments to be made as close to the cut-off-date as possible but this should not be taken in isolation as it is likely to lose the facility of availing the discounts. So, the payments should be made close to the cut-off-date while utilizing the discounts if any. In this manner, in the former case the discount is offered for early payment to generate the revenue quickly. In the latter case the discount is availed to clear the debts as well as using the facility of discount. This is how the two-fold benefit can be obtained.

 Next in importance comes the receivable. It is universal truth that every Business has receivables. They are the dues from the credit customers. There are various reasons for credit sales, such as, to penetrate and establish in the market, to increase sales, to get more customers and to help customers on whom the fortune of a business is contingent. While managing receivables, an organization develops the policies which are beneficial to both the customers as well as to the organization that makes credit sales. Credit policies must have few standards, credit period, credit terms, etc so as to manage the receivables in an efficient manner. Credit standard is meant to the classification of customers depending upon the relationships and in terms of risk etc.

 The credit period is referred to how long a period should be allowed. Credit terms mean offering discount on early payment or the payment before the cut-off-date. In the point of fact, it should be understood that making too much credit sales leads to much benefit and make profit on the one hand while it involves the creation of bad debts or risks on the other. Thus, the best possible way is to be adopted for receivable is to manage within the accepted level with the establishment of planning as well as controlling measures. The impact of inventory management on working capital is vitally important. A company, whether of trading or of manufacturing, has to carry certain amount of inventories. Inventories are classified as inventory of finished goods, of raw materials or of work in process depending upon the type of business. A trading company purchases or sells the finished goods whereas the manufacturing company deals with all types of inventories. At this juncture, it should be noted that having too much or too little inventory becomes a problematic cause in terms of sales and production. Also, even a little less or more amount of increase or decrease in the costs of inventories gives rise to a radical change in terms of overall amount of investments in the inventories.

 Thus, inventory management involves planning and controlling functions with regard to the order of quantity of even single unit and the specific task of inventory management is to answer the questions: when to order the inventory, how much inventory is needed and if any discounts are likely to be lost by not ordering as per the standard limit of order etc. It is therefore necessary for the process of inventory management to find satisfying answer to the above questions pertaining to various costs of the inventories. It is appropriate to mention that there are several techniques available for the effective management of Inventories with which the management can be benefited. Marketable securities categorized as short term investments to earn profit rather than going for long term investments- They are regarded to be connected with the cash management. What may be briefly mentioned in terms of marketable securities is they are involved in the short term investments. A company can prefer short term investments in them rather than holding large cash. The importance lies in the fact that holding cash does not provide any return, on the contrary, marketable securities are purchased with a purpose of the generating profits.

 Marketable securities categorized as short term investments to earn profit rather than going for long term investments- They are regarded to be connected with the cash management. What may be briefly mentioned in terms of marketable securities is they are involved in the short term investments. A company can prefer short term investments in them rather than holding large cash. The importance lies in the fact that holding cash does not provide any return, on the contrary, marketable securities are purchased with a purpose of the generating profits. Mention deserves to be made about the overall significance of financial management in a few words. Financial management is distinctive area of business management and the Financial Manager has a key Role in overall business management ensuring the achievement of business objectives and wealth or profit maximization. Financial management is an integral part of overall management affecting the survival, growth and strength of a business. The sole task of financial management is maximization or optimizing the value of firm. If dealt effectively, a financial manager can ward off a large number of problems.

 If we are interested in doing our own business we must find our real talent and skills as well as favorite field. If we start our business with our favorite field with our full focus, surely we will achieve a lot. Most of the business magnets are started their life as a common person and started their business without more investment. Their effort, confidence and determination is their investment and achieve a lot with their hard work. If you are good and have lot of skills in a particular field, you can start your business with it. For example, if you are interested in computers and online field, you can start your home based online jobs without any investment and achieve a lot with it. Online earning is quite common now a days and lot of people are interested in doing it and earning a lot based on their hard work. Lot of options are available for online earning, we must find out our skill and do our work with it. Apart from online we can do some good offline jobs based on our interest.

 If you are good in writing, you can start writing in various magazines and earn from it. Form filling work is also apt for the writers. You can help others for filling their application form as well as earn money for your work. One of my friend started this kind of form filling work and made a good income with his hard work. Now he is turned as a owner of an agency. At the beginning he helped the people to fill the school, college and important application forms. He is getting popularity with his writing and simplicity. Day by day lot of people come to his place to fill the form and he started it as his job and now he opened an agency for form filling jobs and earning a good income without any investment. Don't ignore any job. All kind of jobs which is giving earning to us is having its uniqueness and importance. A lot of jobs are available in this world, if we find our real talent, we will become self employed and earn a lot based on our talent.

 Business is an economic system in which goods and services are exchanged for one another or money, on the basis of their perceived worth. All business needs some form of investment and a sufficient number of customers to whom its output can be sold at profit on a consistent basis. Stephenson said that a business is the regular production or purchase and sale of goods undertaken with an objective of earning profit and acquiring wealth through the satisfaction of human wants. Also business is a human activity directed towards producing or acquiring wealth through buying and selling of goods acclaimed by Lewis Henry. Nevertheless, Dicksee said that business refers to a form of activity conducted with an objective of earning profits for the benefit of those on whose behalf the activity is conducted. Warren Buffet wrote that good jockeys will do well on good horses, but not on broken-down nags. And he stressed that it is the reputation of the business that remains intact. The main point of business is carried on with the intention of earning a profit. The profit is a reward for the services of a businessman and it is his ultimate goal.

Business is classified according to its field of operations. In agriculture and mining, the business is concerned with the production of related products, such as livestock and plants or minerals. A financial business will include banks and other companies that generate profit through investment and management of capital. In the world of information the business generated profits primarily from the resale of intellectual property and includes movie studios, publishers and packaged software companies. Manufacturers produce products, from raw materials or component parts, which they then sell at a profit. Companies that make physical goods, such as cars or pipes, and other manufactured products are involved in the manufacturing business. Real estate business generates profit from the selling, renting, and development of properties comprising land, residential homes, condo units and other kinds of structures. The retailers and distributors who will act as the bridge between the goods produced by manufacturers to the intended consumer, generating a profit as a result of providing sales or distribution services. Service based business offers intangible goods or services through utilizing the skills and expertise of individual that will render the offered services and normally create a profit by charging for labour or other services provided to government, other businesses, or consumers.

Real estate business generates profit from the selling, renting, and development of properties comprising land, residential homes, condo units and other kinds of structures. The retailers and distributors who will act as the bridge between the goods produced by manufacturers to the intended consumer, generating a profit as a result of providing sales or distribution services. Service based business offers intangible goods or services through utilizing the skills and expertise of individual that will render the offered services and normally create a profit by charging for labour or other services provided to government, other businesses, or consumers. Organizations ranging from house decorators to consulting firms, restaurants, and even entertainers are types of service based business. Transportation business delivers goods and individuals from location to location, generating a profit on the transportation costs, this usually in the form of land travels, sea navigation or air transport. Other type of business is in the formed of utilities that will produce public services such as electricity or maintenance, usually under a government agreement. The competent and effective function of a business should have a good management and Management is one of the studies in the world of business. The major branches of management are financial management, strategic management, marketing management, human resource management, production management, service management, operations management and information technology management. Those branches

 Depreciation is decrease in the value of assets due to getting

old, wear and tear, accidents and other reasons. Generally it is debited in Profit and loss account at a fixed percentage of the value of assets.

 banking Definition In general terms, the business activity of accepting and safeguarding money owned by other individuals and entities, and then lending out this money in order to earn a profit. Ads by Google Read more: http://www.investorwords.com/5413/banking.html#ix zz1ynkucr88