What is Accounting?

Accounting is defined as the art of recording, classifying, and summarizing transactions in monetary terms i.e. money terms for the preparation of the Financial Statements.

Let us know the meaning of Recording, Classifying, and Summarizing from the above meaning of Accounting.

• Recording - Recording refers to creating a Journal entry for every financial transaction with Debit or Credit amounts.

• Classifying - Classifying refers to classifying each of the Debit or Credit transactions to Capital or Revenue or Asset, Liability, Revenue or Expense.

• Summarizing - Summarizing refers to grouping the transactions of Asset, Liability or Revenue and Expenses and preparing the Financial Statements like Trading, Profit & Loss and Balance Sheet.

In the case of trading, manufacturing, and customer service-oriented organization, the sum of all income and expenses is referred to as the Profit and Loss account. A social service-oriented organization like Schools, Hospitals, and Government organizations, Banks as it is referred to as Income and Expenditure account.

This is all about Accounting Basics. We will learn more about Accounting in our upcoming blogs.