Accounting Essay -- Business Management Studies

Accounting Accounting is the practice of â€Å"†¦maintaining, auditing and processing financial information†¦Ã¢â‚¬  (http://en.wikipedia.org/wiki/Accounting) for the purpose of a company, persons or organisation. There are some fundamental parts of accounting which are; â€Å"Identifying, measuring and communicating† (Black, 2000). You need to identify the important financial sections of a company, person or organisation which will include the companies assets, liabilities, capital, income and of course expenditure. You will also need to measure â€Å"†¦ monetary values of the key financial components in a way which represents a true and fair view of the organisation† (Black, 2000). Finally there is the communication side of accounting, it is vital that a company, person or organisation can communicate all of the financial information gathered so in turn users, whether they are internal or external, will be able to receive the correct financial information and be able follow it. There are two forms of accounting they are Financial Accounting and Management Accounting. Financial Accounting is concerned with the preparation of financial accounts for the benefit of people outside a company or organisation. Management Accounting is financial information used by managers within a company or organisation to make financial decisions based on the information that the accounts provide. There are many people who would be interested in company’s accounts, they are divided up into two groups; External Users and Internal Users. Within the External Users group are; Investors, lenders, Suppliers, Customers, prospective buyers, other businesses and the Government. Included in the Internal Users group are the Owners, Shareholders, the Board of Directors and Employ... ...ounts Payable which are debts owed BY a company, person or organisations which, at present have not been paid, Capital, Income and finally Revenue and as before if there was a increase in any of the above it would be a Debit entry. For example if a company, person or organisation was to purchase a fixed asset such as a building or piece of machinery this would be an increase in that company, person or organisations assets and would therefore be a Debit entry, the other side of the entry would be a Credit entry as there would be a decrease in the bank account of the company, person or organisation. The Double Entry Bookkeeping is essential in order for a company, person or organisation to keep track of all financial transaction as Double Entry is a very detailed financial account and everything that comes in or out of the business is written in a Double Entry Account.