Accountancy in its simplest form means the process of keeping a record of financial transactions. It is the practice of managing the incomes and expenditures of an entity or business. A business undertakes numerous financial transactions daily. It is therefore of consequence for businesses to keep a log and summary of those transactions. In CBSE Board, the subject Accountancy starts from standard 11 but in UP Board it starts from grade 9 only.
Accountancy – Book Keeping
Such record keeping is important for multiple reasons, some of which are listed as below:
- It helps in management of financial transactions and records of a business
- It leads to improved decision making by providing comprehensive records which can be analyzed and compared
- Provides relevant financial and non-financial records to internal and external stakeholders
- Useful in legal matters and for tax purposes
Furthermore, it would be useful to understand how accountancy came into existence and the types of accountancy.
History of Accounting
Accounting has been in existence since forever. It is believed that ancient civilizations such as Ancient Mesopotamia, Ancient Iran, Ancient Egyptians and Babylonians have been closely linked with bookkeeping and development of accounting.
Luca Pacioli is renowned as Father of Accounting. He published the first ever work on a double-entry bookkeeping system, known as the Summa de arithmetica. It was published in Italy in 1494.
In Nineteenth century, Accounting began turning into an organized profession.
Types of Accounting
This branch of accounting deals with collating the financial records and transactions of a business for external parties. People who are willing to invest in a business, or its creditors are interested in the financial health of the company.
Financial statements for a business is made in conformity with generally accepted accounting principles (GAAP), which is updated timely.
As the name suggests, management accounting is useful for managers or internal stakeholders in making informed business decisions and meeting business objectives. It is meant for internal purposes and include cost benefit analysis. Setting up financial objectives and preparing budget to meet business goals are part of management accounting.
It does not require compliance with generally accepted accounting principle (GAAP).
Manufacturing or a product or proving a service involves several costs. Cost accounting involves keeping an account of all these different costs borne by a business.
Cost accounting can be treated of as a subset of management accounting. It helps managers and internal members to make analysis of fixed and variable costs. As such, it analyzes the costs incurred by a business on different products and processes and aims to optimize it.
Tax accounting is the type of accounting focused on evaluation and payment of taxes. With this, not just businesses but individuals can also keep account of their funds and corresponding taxes.
Tax accounting is useful in proper filing of required tax documents, analyzing tax burden while adhering to requisite tax laws and standards.
Public accounting simply means providing accounting services to other individuals or businesses. Public Accounting firms are medium to large corporations employing several accountants to undertake accounting for their clients.
Public accounting firms perform various kind of accounting works for their clients. This includes auditing their financial statement, preparing and filing their taxes, providing consultation and so on.
The term Government Accounting is self-explanatory. It refers to recording to summarization of income and expenditures, and overall financial transactions of the government.
Since the objective of government is to serving people and not earning profits, government accounting works on a single-entry system. This means there is no cross-checking of accounts as accounting statements are done to keep track of revenues and expenditures.
The term Forensic relates matters concerning criminal activities, fraud and legal matters. In this framework, Forensic accounting refers to using accounting framework to investigate any criminal and fraudulent activities. It may involve examining and completing missing records to identify the fraud.
Auditing simply means inspection of financial records and accounts and the corresponding checking of physical stock to ensure documentation of all transactions.
– External auditing- Auditing the financial records of a company by an external independent party to audit the financial records without any bias.
– Internal Auditing- Internal auditors are appointed by company to assess that they are maintaining due and complete records and are compliant with legal regulations.
Purpose of Accounting
Whether you are an entrepreneur or you work for somebody, accounting plays a vital role. Your basic motto is designed to achieve one or two main objectives. Making profit almost always tops the list. Practically there arises a need to understand financial information. The basic purpose of accounting is to make us understand the financial aspect. This would make you more valuable to the employer and clients as well. By understanding accounting thoroughly, you can understand how a business makes money. The complete knowledge of this subject could make you are complete professional. Accountancy even provides you with the ability to manage your own money, you could keep check on your personal finance. This way you could effectively budget your income.
Accounting in Indian context
In India, accounting jobs are always in demand. If you want to pursue an accounting career in India, there are several options open to you. A number of esteemed universities in India offer Bachelors, Honors and Masters courses in Commerce that specialize in accounting
The accounting standard India adopted by companies in India is known as Indian Accounting Standards (Ind-AS). Prior to adoption of Ind-AS, India followed Indian Generally Acceptable Accounting Principle (IGAAP).
Either mandatory or voluntarily, companies have to follow Indian Accounting Standards.
In order to maintain a technically sound Management Accounting System, the Controller General of Accounts (CGA) is the responsibility. The CGA is the Principal Accounting Advisor to the Government of India.
What is the scope of the subject Accountancy?
Accounting is a dynamic subject. It has got a very wide scope. Its area is application is extremely vast. The use of Accountancy is not confined to the businesses. In fact, it is used across various professions and spheres. Financial transactions are a must in every field giving rise to the need for accounting.
From schools and colleges to co-operative societies and hospitals, every institution uses accounting in some way or another. Thus, the scope of accounting in any field is endless.
What skills and prior subject knowledge is required to excel in accounting?
If you are preparing yourself to opt Accounting as your career field, you need not worry at all. As a beginner in Accounting, more than prior knowledge in any particular subject, your ‘soft skills’ would prove to be useful to excel in the subject. This would include:
Strong oral and written communication skills
Problem solving skills
Giving attention to details
What other subjects should be studied with Accountancy to enhance the scope of the subject?
To extract the maximum benefit out of your study of accounting, complementing it with subjects like Economics and Mathematics would be helpful. When these subjects are clubbed together, they enhance the scope of the subject. You may also require knowledge of these subject if you wish to purse research or specialization in Accounting.
What are the career options available after having done an MBA in accounting?
On pursuing an MBA with specialization in Accounting, vast career options open up. Some of the common and popular career options available are:
Certified Public Accountant
Technical Account Manager
The career options will continue to increase as our economy continues to grow.