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Accounting for Information Technologies, Summaries of Law

Law

accounting and its branches, the nature of it

Typology: Summaries

2019/2020

Uploaded on 03/13/2023

marlyn-bareng
marlyn-bareng 🇵🇭

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BARENG, MARLYN R.
BSIT-2
ACCOUNTING FOR INFORMATION TECHNOLOGY
What is accounting?
Accounting is how finances are tracked by an individual or organization, such as a
small business.-As an individual, you may use an accountant only for submitting your taxes,
which is handled by certified public accountants (CPAs), who must pass an exam to prove
their mastery of accounting. Business accounting is the process of collecting and analyzing
financial information for a company. It can be done by an individual, business or accounting
team. The information you gather helps you understand the company’s business activity and
create financial reports.
Nature Of Accounting
Nature of Accounting Structural Viewpoint:
Accounting is sometimes defined as a science, sometimes as an art, and somewhere as a
combination of both.
1. Science or an art
Science is a body of systematized knowledge. It consists of logically developed
principles and techniques based on cause and effect.In an identical or given set of
circumstances, the laws of science can be applied equally. But the art of applying the laws
may not becomes the same. Accounting is a body of principles and techniques which have a
logical framework. This can be used universally under different circumstances But
application or mode of accounting is an art. Accounting, the subject of accounting, is a
science but accounting is an art equally. It is the main nature of accounting. 4
2. It is a history?
Accounting is an economic history related to an accounting unit and recorded by the
accountant concerned. Normally, a historian records events taking place in political and other
fields over the years. The accounting records the economic history of the events which are
significant for concerns. Accounting results are recorded in quantitative terms and have
monetary expressions. The historian may also record economic events. But the form of that
record is usually narrative and the expression is made is qualitative terms. Moreover,
accounting is not confined to mere record keeping. It involves the classification and
summarization of significant events and analysis and interpretation of their financial results
3. Special Aspects
With the development of the branches of accounting, the nature of accounting it has now
become a social science. It is now considered as a service activity. The purpose of accounting
is not to serve the individuals only but to serve the society as a whole. The measurement of
national wealth, national income, etc are becoming possible through national or macro
accounting.
4. Is it a tool of Management
Accounting, at present, is also serving as an essential tool of management. The concept of
Management Accounting has emerged from financial accounting. Management accounting
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BARENG, MARLYN R.

BSIT-

ACCOUNTING FOR INFORMATION TECHNOLOGY

What is accounting? Accounting is how finances are tracked by an individual or organization, such as a small business. As an individual, you may use an accountant only for submitting your taxes, which is handled by certified public accountants (CPAs), who must pass an exam to prove their mastery of accounting. Business accounting is the process of collecting and analyzing financial information for a company. It can be done by an individual, business or accounting team. The information you gather helps you understand the company’s business activity and create financial reports. Nature Of Accounting Nature of Accounting Structural Viewpoint: Accounting is sometimes defined as a science, sometimes as an art, and somewhere as a combination of both.

1. Science or an art Science is a body of systematized knowledge. It consists of logically developed principles and techniques based on cause and effect.In an identical or given set of circumstances, the laws of science can be applied equally. But the art of applying the laws may not becomes the same. Accounting is a body of principles and techniques which have a logical framework. This can be used universally under different circumstances But application or mode of accounting is an art. Accounting, the subject of accounting, is a science but accounting is an art equally. It is the main nature of accounting. 4 2. It is a history? Accounting is an economic history related to an accounting unit and recorded by the accountant concerned. Normally, a historian records events taking place in political and other fields over the years. The accounting records the economic history of the events which are significant for concerns. Accounting results are recorded in quantitative terms and have monetary expressions. The historian may also record economic events. But the form of that record is usually narrative and the expression is made is qualitative terms. Moreover, accounting is not confined to mere record keeping. It involves the classification and summarization of significant events and analysis and interpretation of their financial results 3. Special Aspects With the development of the branches of accounting, the nature of accounting it has now become a social science. It is now considered as a service activity. The purpose of accounting is not to serve the individuals only but to serve the society as a whole. The measurement of national wealth, national income, etc are becoming possible through national or macro accounting.

  1. Is it a tool of Management Accounting, at present, is also serving as an essential tool of management. The concept of Management Accounting has emerged from financial accounting. Management accounting

also utilizes the materials disclosed by accounting books. But through reframing or restructuring, the materials are translated further into estimates or statements which the management can use to discharge its function more effectively. Accounting has assumed a hetero-dimensional nature of accounting. It is a dynamic science expanding its horizon of application regularly.

5. Man-made system Accounting is a man-made system, which must be evolved out and adjust itself with the changing need of mankind it is the primary nature of accounting 6. Accounting is a process It is defined as a process because it performs some specific tasks, consisting of collecting, processing, and communicating financial information. It is another nature of accounting. 7. Monetary Events The basis of accounting is the economic event which refers to the incidents that cause changes in the financial position of the concern. 8. Accounting is a means and not an end As a language of the business, accounting is used to communicate business information to the interested users of that, so that vital decision may be taken. Keeping of accounts itself can never be the primary objective of an enterprise rather the objective is to know the financial performance of a particular period or the financial position of the enterprise on a particular data. Thus, it is not an end with merely reporting the financial results of the concern to the users but also pave the way of decision making. It is the main nature of accounting. **Nature of accounting Functional view point:

  1. Accounting related to Identifying, Measuring, and Communicating Accounting Information** Form the different definitions given it is clear that accounting is involved with recording, classifying, summarizing, finalizing, interpreting, and communicating financial information. It is a body of systematic knowledge, principles, and techniques by applying which financial data is translated into final information and communicated to the users of accounting information. 2. Accounting related to identification of transactions: During an accounting period, many events may take place is a concern. Some of these have financial impacts and some others are of non-financial nature. Accounting identifies those events which are fully or partly of financial nature. It records only those events as a transaction. Events that create no change in the financial position like inter-departmental transfers of employees in the same cadre - are not identified or recorded. 3. Accounting related to Measurement: Accounting is associated with the measurement of resources, claims against such resources, and the owner's interest in an accounting concern. It helps to measure the change in the said resources. The measurements are made in terms of money.

Financial Analysis Companies use accounting to perform regular analysis of how well the business is performing. Either, outside consultant or internal personnel will look at the business as a whole to determine what functions can be made more efficient based on financial outcomes. They may suggest changes to employee departments or streamlined costs for production to reduce waste.  Taxes and Compliance A business must comply with government laws and standards from the Internal Revenue Service and the Securities and Exchange Commission, among other regulations. States also enforce monetary guidelines for businesses. Accounting is responsible for reporting the financial workings of the company and making sure they conform to all local and national laws and guidelines.  Budgeting Accounting is in charge of setting a company's budget. They use financial data from the past as well as projections for future income to compose annual budgets. Accountants also prepare budgets for individual departments and special projects within the company. A Brief History of Accounting The history of accounting or accountancy is thousands of years old and can be traced to ancient civilizations. The early development of accounting dates back to ancient Mesopotamia, and is closely related to developments in writing, counting and money and early auditing systems by the ancient Egyptians and Babylonians. By the time of the Emperor Augustus, the Roman government had access to detailed financial information. In India Chanakya wrote a manuscript similar to a financial management book, during the period of the Mauryan Empire. His book "Arthashasthra" contains few detailed aspects of maintaining books of accounts for a Sovereign State. The Italian Luca Pacioli, recognized as The Father of accounting and bookkeeping was the first person to publish a work on double-entry bookkeeping, and introduced the field in Italy. The modern profession of the chartered accountant originated in Scotland in the nineteenth century. Accountants often belonged to the same associations as solicitors, who often offered accounting services to their clients. Early modern accounting had similarities to today's forensic accounting. Accounting began to transition into an organized profession in the nineteenth century, with local professional bodies in England merging to form the Institute of Chartered Accountants in England and Wales in 1880. Accounting records dating back more than 7,000 years have been found in Mesopotamia, and documents from ancient Mesopotamia show lists of expenditures, and goods received and traded. The development of accounting, along with that of money and numbers, may be related to the taxation and trading activities of temples: The early development of accounting was closely related to developments in writing, counting, and money. In particular, there is evidence that a key step in the development of counting the transition from concrete to abstract counting was related to the early development of accounting and money and took place in Mesopotamia. Other early accounting records were also found in the ruins of ancient Babylon, Assyria and Sumeria, which date back more than 7,000 years. The people of that time relied on primitive accounting methods to record the growth of crops and herds. Because there was a natural season to farming and herding, it was easy to count and determine if a surplus had been gained after the crops had been harvested or the young animals weaned.

Common Branches of AccountingFinancial Accounting The technique of documenting a company’s financial transactions in accordance with generally accepted accounting standards is known as financial accounting. It is the first and most basic version of the accounting procedure. Financial accounting is performed with the intention of adhering to rules that are imposed from the outside, whereas managerial accounting is performed with the purpose of analyzing and making decisions regarding one’s financial situation.  Cost Accounting Accounting for costs is one subfield that falls under the umbrella of management accounting. Manufacturing is an industry that often makes extensive use of cost accounting since it is responsible for the management of a large number of resources and expenses. It is a form of accounting that is carried out within a business with the purpose of evaluating its operations. The methods of documenting and analyzing the costs of production are what cost accounting is all about. This is what the term “cost accounting” refers to.  Auditing Auditing may be broken down into two categories: external auditing and internal auditing. During an external audit, a non-affiliated third party examines a firm’s financial accounts to verify that they have been appropriately presented and are in accordance with generally accepted accounting principles. Auditing is a subfield of accounting in which a third-party certified public accountant, often known as an Auditor, examines and verifies the company’s financial records to determine whether or not they are accurate and consistent. There are other occasions when the practice of internal auditing is carried out.  Managerial Accounting Accounting of this type, which is frequently referred to as management accounting, entails supplying managers with data on the activities of a company. The purpose of managerial accounting is not to strictly comply with generally accepted accounting principles (GAAP), but rather to provide data that managers require in order to make decisions regarding the operations of a corporation. This is because GAAP compliance is not required for managerial accounting. This subfield of accounting supplies management with information that enables them to perform their duties as administrators of the company more effectively. It helps regulate the business’s numerous operations and make critical decisions for the company.  Accounting Information Systems Known as AIS, accounting information systems concerns itself with everything to do with accounting systems and processes and their construction, installation, application and observation. This can involve the administration of accounting software and the management of individuals responsible for bookkeeping and accounting.  Tax Accounting Accounting for taxes requires preparation of tax returns as well as formulation of plans for next tax seasons. In addition, this subfield of accounting helps ensure that companies are in compliance with relevant regulations.