Accounting Definition System+ Advantages and Disadvantages

Hi, Today we will talk about the Accounting Definition So, we discuss the concepts that are needed in order to know about accounting. If you have any query then you can leave the comment.

Accounting Definition System + Advantages and Disadvantages

Accounting Definition System+ Advantages and Disadvantages

Definition

  • The art of recording, classifying and also reporting the financial data of an organization
  • The art of collecting, processing, analyzing, interpreting as well as projecting of financial information
  • The principles of practice of systematically recording presenting and interpreting financial accounts
  • It can be defined as the process of identifying, measuring and communicating economic information to permit informed judgment and decisions by users of information.

Moreover, accounting may not require knowledge of mathematics but you need to be able to add subtract, multiply as well as divide things you need to be able to do in your daily life. Otherwise, you would not know how much money you had with you or how much you would have. If you spent some of it, or whether the change you received was carried. So let’s remove one big misconception some people have concerning accounting. These misconceptions include to be good at arithmetic to be good at accounting, through you will find it easier to do something if you are.

Advantages

  • It helps in knowing profit.
  • It also helps to know the financial position of the organization.
  • It helps to know the lost of creditors.
  • Provides assistance to management.
  • Helpful in settlement of accounts.

Disadvantages:

  • It records depend on the past happening.
  • The record is not fully exact.
  • It ignores the qualitative elements.
  • It ignores the effects of the varying price level.
  • It may lead to windows dressing

System

There are 2 systems:

  • Cash system
  • Accrual system

Cash System

It is a system where accounting entries are made whenever cash receives or paid.

Accrual system

It is a system in which accounting entries are made on the basis of amount having become due for payment or receipt.

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