Accounting Cycle, Object Of Accounting And Function Of Accounting

Accounting Cycle:-

Journal: Transactions on daily basis are first recorded in book known as journal.

Ledger: Than these transactions are grouped by transferring to concerned accounts known as ledger accounts. The process of transfer is known as posting.

Trial Balnce: At the end of period ledger accounts are balanced and a summary is prepared known as Trial Balance.

Profit & Loss: From trial balance the profit and loss is ascertain by preparing final statements.

Balance Sheet: After that Balance sheet is prepared which is the statement that shows the value of assets and liabilities as on a particular date.

Continuity: The balance of Balance Sheet carried forward to next year and whole process repeat for the year.

Objective Of Accounting:-

1. Keeping Systematic Record: The prime objective of accounting is to keep the systematic record of financial transactions, to post them to ledger accounts and ultimately prepare final statements. So that there shall be a permanent records of business transaction.

2. Proctecting Properties Of The Business: Accounting also serve the means of protect the business property, by avoiding the unauthorized use of business asset. An accountant has to desing such a system of accounting as will protect its assets from an unjustified use of assets.

3. Communicating The Result: Accounting aim at communicating the results ontained from arranging of data to interested parties like properietors, creditors, investors, employees, government agencies and researchers.

4. Meeting Legal Requirements: The accounting is done also for meeting legal requirements under different provisions of law. The business has to file accounting statements to income tax authorities, sales tax authorities etc. 

5. To Ascertain The Financial Position Of The Company: Another important objective of the accounting is to know the financial position of the firm, what he owns, what he owns? This objective is served by the Balance sheet of the firm.

6. To Facilitate Rational Decision-Making: Accounting involves the tasks of collection analysis and reporting of the information to authorities to facilitate in taking rational decision-making.

Functions Of Accounting:- 

1. Recording: This is the function of the accounting.This is concerned with writing the business transaction in the book called "Journal" in the systematically manner. However depending upon the size of business journal may be divided in the different subsidary books like Purcahse Journal, Sales Journal and Cash Journal.

2. Classifying: Classification means grouping of transactions of same nature at one place. The work of classification is done in book called "Ledger". In this all transaction relating to one account is grouped at one place. This will help if finding the net effect of all the transactions during a year on a particular account.

3. Summarizing: This involves presenting the information inn summarized way to get an overview of the accounting information. This process leads to preparation of Trial Balance, income statement and Balance Sheet.

4. Analyses And Interprets: In this function the recorded information is analyzed and interpreted so the user can make the useful application of the information and can judge the financial position of the firm. This also helps in planning the setting up the budgets for the business.

5. Communicates: The analyzed and interpreted meaningful information should be communicated in a proper from and manner to the proper person.

6. Protection Of The Business Property: Accounting involves verification of assets and liabilities, which ensures that business property is protected from unauthorized use.