Understanding Accounting Cycle

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    Understanding Accounting Cycle

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    ` Accountancy oraccounting is the art of communicating financialinformation about a business entity to users such as shareholders andmanagers. The communication is generally in the form offinancialstatements that show in money terms the economic resources underthe control of management.

    ` Such financial information is primarily used by managers, lenders,

    investors, tax authorities, regulators, and other decision makers tomake resource allocation decisions between and within companies,organizations, and public agencies. It involves the process of recording,verifying, and reporting of the value of assets, liabilities, income, andexpenses in the books of account (ledger) to which debit and creditentries (recognizing transactions) are chronologically posted to recordchanges in value (see bookkeeping). Accounting has also been defined

    by theAICPA as "The art of recording, classifying, and summarizing in asignificant manner and in terms of money, transactions and eventswhich are, in part at least, of financial character, and interpreting theresults thereof."

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    ` Stewardship Accounting

    ` Financial Accounting

    ` Cost Accounting

    ` Management Accounting` Social Responsibility Accounting

    ` Human Resource Accounting

    ` Inflation accounting

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    ` Business Entity Concept

    ` Money Measurement Concept

    ` Going Concern Concept

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    Cost Concept` Realisation Concept

    ` Accrual Concept

    ` Materiality Concept

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    Consistency Concept` Periodicity Concept

    ` Dual aspect Concept

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    ` a) An accountant is one who is engaged in accounts keeping.

    ` b) An accountant is a functionary who aids control.

    ` c) An accountant keeps the conscience of an organisation.

    ` d) An accountant is a professional whose primary duties are concerned with information management forinternal and external use.

    ` e) An accountant is a fiscal adviser.

    ` f) An accountant produces an income statement and a balance sheet for an accounting period, andmaintains all supporting evidence and classified facts that lead to the final accounting statements.

    ` g) An accountant verifies, authenticates, and certifies the accounts of an entity.

    ` h) An accountant provides necessary information for various managerial decisions.

    ` Tell us your reactions about the above statements. Perhaps you do have your own ideas, but ourthinking is that each of the foregoing statements contains some truth in it as it highlights some aspects ofthe functions of an accountant.

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    ` Materiality in Disclosure;

    ` Consistency;

    ` Conservatism or Prudence

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