What is accounting? In this blog we will talk about accounting. In which you will discuss about what is accounting?, benefits of accounting, types of accounting.
What is Accounting?
Accounting is a process that records financial transactions. The process of accounting keeps the information about any financial transaction happening in the organization or any business. This information is given in writing. Accounting is a method in which all the activities of the business are recorded and kept. For example: – Business transactions, profit-loss, transaction of goods (buying and selling), property of the company, loans, etc. are regularized through accounting. To run any business, an accountant is required, who tells the profit and loss of the entire business, when there is loss and when there is profit and how much tax is to be paid. How is the financial performance of the accountant business going, at what time managing, and what will benefit the company?
Accounting is as much science as it is art. Business transactions are recorded in it. Accounting follows all the transactions relating to a particular head. An account refers to a transaction record of similar transactions with anything or a person. Now we will discus about types of accounting.
Main Three Types of Accounting
There are three main types of accountings:
- Personal Account
- Real Account
- Nominal Account
Personal accounts are associated with any person and company; they are called personal accounts. All those accounts are included in the personal account from which the business knows how much to take from whom and how much to give. All these records are written in the personal account. In the statement of personal accounts, it is known how many transactions have been done, in this, what types of accounts are involved, and which is this.
• bank account
• A B C Limited Account
• Consumer and Supplier Account
• individual account
• drawing account
• Institution Account etc.
There is also a rule for the personal account which is this.
debit the receiver and credit the giver
A real account is an account that is related to any asset or thing, it is called a real account. All information related to goods and services and liabilities from real accounts is recorded. Real Accounts gives information about Assets, Stock and Property, Cash, Liabilities, Machinery Product, etc. of a company. There are two types of Real Accounts Tangible and Intangible.
Tangible Real Account
A tangible real account is an asset that has lost its physical presence. Which we can easily see by touching it is called Tangible Real Accounts. Here are some examples: –
- vehicle account
- land account
- building account
- furniture account
- Machinery account, etc.
Intangible Real Account
Intangible Real Accounts are assets that cannot be touched, they can only be felt. These assets do not have any physical presence; they can only be felt. It is called Intangible Real Accounts.
For example: –
- Goodwill account
- Patent account
- copyright account
- Trademark account etc.
There is also a rule for the real account which is this; –
A nominal account is an account that records monetary transactions within a single accounting year only. This takes the nominal account balance back to zero. The balance amount is made ready to receive the new batch of transactions at the beginning of the next financial year. Received using a nominal accounts. This information is given in the income statement. A nominal accounts is an account that records transactions that occur within a single year of accounting.
Example accounts of nominal accounts: –
pay or receive account
Nominal accounts rule.
debit all expenses and losses and credit all income and
Benefits of Accounting
here are the benefits of Accounting:-
1. It is difficult for anyone to keep a record of everything. This also increases the chances of making a mistake. There are thousands and hundreds of transactions in business, many things are transacted. These transactions can be both in cash and credit. Wages, salary, commission, etc. are paid in kind. It is not easy to remember all these sufferings. Accounting removes this deficiency. With this, the record of all transactions can be easily seen.
- A lot of news related to accounting business reaches us easily like:
- Profit and loss information
- credit balance information
- Assets and loan information
- business turnover, economic conditions, etc. information of
- When there is a problem related to payment from other merchants in the process of a money transaction, it can be seen in the accounting records from which merchant, how much payment is to be taken, and to whom is it to be given.
- Helps with problems related to salary, bonus, etc. of the employees.