Basics Of Accounting

Accounting is a crucial part of a business. In accounting we record all the financial transactions. No Nonfinancial transactions will be recorded as far as accounting is concerned. Financial transaction means a transaction which involves movement of money from one party to another party. This movement of money does not mean it is only a consideration for a transaction, it includes all type of financial transactions.

In accounting we record only financial transaction because in order to have a regular check on the finance part of company by the management and by the users of the financial statement of a company.
Users of the financial statement of a company means the following persons :
1. Investors: To have a check on the company whether the company utilizes the resources obtained in a more effective and efficient way.
2. Government: To monitor a company whether they comply with all the laws and regulations made there under to be complied with.
3. Creditors: To know the credit ratio of the company is as per the standards and whether the company could run in the foreseeable future.
4. Employees: To know whether they have any chances of receiving a bonus, ESOP, etc.
5. Customers: To know about the company's reputation, quality and the audit report given by the auditor has any Qualified opinion or Disclaimer opinion or Adverse opinion.
6) Citizens: To make a confirmation and a check on the purpose for which the resources are utilised is as per the statement made by the company while obtaining such resources.