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Scope of Accounting:
The scope of accounting can be represented with the help of the following diagram:
Date creation and collection: This is the place that provides the raw material for
accounting. The data is historical since it refers to the events that have already happened.
Once the data is collected, it gets recorded as per the accounting principles, hence the
transactions or events are recorded in the books in the of a journal and ledgers. This step
of recording and processing of information usually forms a substantial part of the complete
accounting work, and so it may also be called as recordative. To process these
transactions, the method employed can be manual, mechanical or electronic. In the
current era, companies mostly use computers for this kind of job.
Data reporting: This consists of two-part, namely, external and internal reporting.
External reporting refers to the communication of financial information to outside
stakeholders, such as shareholders, governments, agencies and regulatory bodies, while
the internal reporting is more concerned with communicating financial analysis results to
the management to decide with regards to the business.
Role of Accounting:
The following can be some of the roles of accounting:
Inflation Accounting: This type of accounting is concerned with the adjustment in the
value of assets and of profit in the light of changes in the price level. In other words, it
tries to overcome the limitations that arise in financial statements on account of the cost
assumption and the assumption of a stable monetary unit. Thus, it aims to correct the
discrepancy in the reported results caused by the price level changes. For instance, a
rising price during inflation has the distorting influence of overstating the profit.
Accounting Personnel:
Every organization will have an accountant as his role is all-pervasive and is involved in a
number of activities, especially in a large and complex organization. Although the exact
responsibilities of the person may vary from organization to organization, a broad
spectrum of responsibilities can be identified.
The accountant can be broadly categorized into two categories, namely:
1. Those who are in public practice: They offer their services for conducting the financial
and or cost audit, and so they are known as auditors. The auditor, appointment by the
shareholders of the company has the primary responsibilities of examining the books
of accounts and financial statements (such as Balance Sheet and Profit and Loss
Statement) of the company and state whether they give a true and fair view of the
state of affairs of the company or not. Besides conducting the audit of the company,
these accountants may also provide consultancy/professional services for designing
and improving the accounting and management control systems of the company. In
India, the public accounts will have to be a member of professional accounting bodies
like the Institute of Chartered Accountants of India or the Institute of Cost and Works
Accountants of India.
Final Comments:
Thus, it is evident that accounting is an important service activity of any business as it
can be perceived as an information system that has its inputs, processing, and outputs.
However, the usefulness of accounting lies in its capacity to provide information to
business stakeholders so that they can take correct decisions depending on their
objective/goals.