Chapter 1 Scope And Meaning Of Accounting
CHAPTER
1
Scope and Meaning of Accounting
Introduction
Need and Role of Accounting
Meaning of Book
-keeping and Accountancy
Book-keeping
Accounting — Science or Art
Definition and Explanation of Accounting
Users of Accounting
Scope/Branches of Accounting z Financial Accounting
z
Cost Accounting
z
Management Accounting
Systems of Accounting
Objectives/Advantages of Accounting
Limitations
Terminology often used — Some Basic TTerms erms
Check Y our Understanding
Your
Pick up the Most Appropriate
Recall your Memory
Objective Questions
Interview Questions
Accounting for Managers
2
1.1 INTRODUCTION
Accounting is an ancient art, as old as money itself. In the beginning, accounting has been elementary. The modern system of accounting owes its origin to Pacoili who lived in Italy in
18th Century. Pacioli codified rather than invented the system of accounting and he is widely regarded as the “Father of Accounting”. Even in our country, Chanakya has clearly indicated the need of Accounting and Auditing in his book “Arthashastra”. The Indian system of accounting is as scientific and systematic as the one developed in the West. We do not lag behind the West in the origin and development of accounting.
1.2 NEED AND ROLE OF ACCOUNTING
Many consider accounting has a role to play only in business and not in domestic life. This is not, factually, correct. In fact, we see the beginning of accounting in every wise housewife. In case, a housewife records her domestic transactions, connected with money, regularly, she can collect a lot of valuable information. Many intelligent housewives, though not literate, maintain a small dairy to record receipts on one page and all payments on the other page. Receipts are not always many, either in the form of income of the husband, her supplementary earnings, gifts from relations etc. List of payments is relatively more on different items say milk, education,
entertainment,
1
Scope and Meaning of Accounting
Introduction
Need and Role of Accounting
Meaning of Book
-keeping and Accountancy
Book-keeping
Accounting — Science or Art
Definition and Explanation of Accounting
Users of Accounting
Scope/Branches of Accounting z Financial Accounting
z
Cost Accounting
z
Management Accounting
Systems of Accounting
Objectives/Advantages of Accounting
Limitations
Terminology often used — Some Basic TTerms erms
Check Y our Understanding
Your
Pick up the Most Appropriate
Recall your Memory
Objective Questions
Interview Questions
Accounting for Managers
2
1.1 INTRODUCTION
Accounting is an ancient art, as old as money itself. In the beginning, accounting has been elementary. The modern system of accounting owes its origin to Pacoili who lived in Italy in
18th Century. Pacioli codified rather than invented the system of accounting and he is widely regarded as the “Father of Accounting”. Even in our country, Chanakya has clearly indicated the need of Accounting and Auditing in his book “Arthashastra”. The Indian system of accounting is as scientific and systematic as the one developed in the West. We do not lag behind the West in the origin and development of accounting.
1.2 NEED AND ROLE OF ACCOUNTING
Many consider accounting has a role to play only in business and not in domestic life. This is not, factually, correct. In fact, we see the beginning of accounting in every wise housewife. In case, a housewife records her domestic transactions, connected with money, regularly, she can collect a lot of valuable information. Many intelligent housewives, though not literate, maintain a small dairy to record receipts on one page and all payments on the other page. Receipts are not always many, either in the form of income of the husband, her supplementary earnings, gifts from relations etc. List of payments is relatively more on different items say milk, education,
entertainment,