P1 the Purpose of Accounting
P1 Describe the purpose of accounting for an organisation
What is accounting
Accounting is a recording, reporting, and analysis of financial transactions of the business. The person which is in charge or accounting is known as an accountant, this person is specifically in charge to follow rules and regulations, such as the generally accepted accounting principle. Accounting lets businesses to analyze the financial performance of the business, and look for statics such as net profit.
The accounting process
The accounting process is a chain of activities that begins with an operation and ends with the closing of the books. Because this procedure is repeated every reporting phase, it is referred to as the accounting cycle and includes these key steps:
1. Identify the transaction or other familiar event
2. Arrange the transaction’s source document such an order or buy. The source document is the original record of a transaction. During an audit, source documents are used as evidence that a particular business transaction occurred. Examples of source documents include:
Cash receipts
Credit card receipt
Cash register tapes
Customer invoices
Supplier invoices
Purchase orders
Cancelled checks
Payment stubs for interest
Time cards
Deposit slips
Notes for loans
Every source document should include the date, the amount, and a description of the transaction. When sensible, further than these least amount requirements source documents must enclose the name and address of the former party of the contract.
When a source document does not be, for example, when a cash receipt is not provided by a trader or is missing, a document should be generated as soon as possible after the transaction, using other documents such as bank statements to support the information on the generated source document.
3. This part analyses and classifies the transaction. This step of the process involves quantifying the transaction in financial terms,
What is accounting
Accounting is a recording, reporting, and analysis of financial transactions of the business. The person which is in charge or accounting is known as an accountant, this person is specifically in charge to follow rules and regulations, such as the generally accepted accounting principle. Accounting lets businesses to analyze the financial performance of the business, and look for statics such as net profit.
The accounting process
The accounting process is a chain of activities that begins with an operation and ends with the closing of the books. Because this procedure is repeated every reporting phase, it is referred to as the accounting cycle and includes these key steps:
1. Identify the transaction or other familiar event
2. Arrange the transaction’s source document such an order or buy. The source document is the original record of a transaction. During an audit, source documents are used as evidence that a particular business transaction occurred. Examples of source documents include:
Cash receipts
Credit card receipt
Cash register tapes
Customer invoices
Supplier invoices
Purchase orders
Cancelled checks
Payment stubs for interest
Time cards
Deposit slips
Notes for loans
Every source document should include the date, the amount, and a description of the transaction. When sensible, further than these least amount requirements source documents must enclose the name and address of the former party of the contract.
When a source document does not be, for example, when a cash receipt is not provided by a trader or is missing, a document should be generated as soon as possible after the transaction, using other documents such as bank statements to support the information on the generated source document.
3. This part analyses and classifies the transaction. This step of the process involves quantifying the transaction in financial terms,