Accounting Methods
Basic Guide for accountants and bookies
Financial status
Modern accounting is widely recognized as a basic component of business management. Accounting is the means by which managers are informed of the financial status and progress of their companies, thus contributing to the continuing process of planning, control of operations and decision-making. Accounting provides a method of systematically recording and evaluating business activities. This qualification known as the Diploma of Accounting goes into great detail on what skills you need to be an accountant or you you maybe be interested in enroling in this https://training.gov.au/training/details/FNS40217
A large proportion of the information that a business manager requires is derived from accounting data. The ability to analyse and use this data helps managers accomplish their objectives. Through your study of accounting, you will discover the types of business activities that can be accounted for usefully, the methods used to collect accounting data, and the implications of the resulting information. Furthermore, and often as important, you will become aware of the limitations of accounting reports and data.
Recording, classifying and reporting and interpreting the financial data
Another useful definition of accounting is the process of recording, classifying and reporting and interpreting the financial data. While it is important for accountants to have a sound knowledge of the recording and classifying of the accounting process, it is often a relatively minor part of their total responsibility. Accountants direct most of their attention to the reporting and interpretation of the meaningful implications of the data.
Accounting has expanded greatly from its intuitive beginnings. It is now heavily regulated and controlled and there are well-established procedures for virtually all the traditional accounting tasks. The environment within which accounting exists is known as the accounting information system (often referred to as the ‘accounting system’). In the next section we will look at accounting information systems.
Accounting information systems
A system is defined as a group of elements that are formed and interact to achieve goals or objectives. An organization is a system in which a number of people work together to achieve particular objectives. Organizations are increasingly dependent on information.
However, they must be able to get information when it is needed, where it is needed and in the form it is needed. Moreover, this information must complement the collection, analysis and communication of the information management process. The choice of approach to the management of information is driven, in part, by the sorts of decisions being undertaken.
An accounting information system collects, processes, stores, analyses and disseminates information for a specific purpose. At its simplest level, an accounting information system collects and processes a set of inputs (e.g. invoices) and produces a variety of outputs (e.g. reports and calculations) within a business.
For example, a manager who is in charge of ordering materials will use the accounting information system to determine how much material the organization holds and how much it will need. The manager will then decide how much material to order and who to order it from. That decision is entered into the accounting information system by the manager, the order is sent to the supplier by the accounting information system and the accounting information system is updated to show that an order has been placed.
Whereas the information system (e.g. human resources, marketing) will process a mixture of qualitative (i.e. non-numerical) data, the accounting information system focuses almost entirely on processing quantitative (i.e. numerical) data. For a business, the traditional means of communicating accounting information has been the issue of a balance sheet – or, as is more commonly used internationally, the statement of financial position (SoFP) – income statement and additional statements referred to collectively as the financial statements.
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