Commerce Theories

Accounting is the process of recording, summarizing, analyzing, and reporting financial transactions of a business or organization. It involves the systematic and comprehensive recording of financial transactions pertaining to a business, and it also involves the process of summarizing, analyzing, and presenting these transactions in financial statements such as the balance sheet, income statement, and cash flow statement.

Accounting use several purposes in our daily life, like:

1. Recording Transactions: In this records involves keeping track of all type financial transactions that occur within a business, such as sales, purchases, expenses, and payments.
2. Financial Reporting: Accounting provides the necessary information for preparing financial reports that help all stakeholders such as investors, creditors, and regulators etc. to assess the financial health and performance of a business organization.
3. Decision Making: Accounting information helps management make informed decisions by providing insights into the financial position and performance of the business.
4. Compliance: Accounting ensures that businesses comply with relevant financial regulations and reporting standards.
5. Performance Evaluation: It helps in evaluating the performance of different aspects of the business, such as profitability, liquidity, and solvency.

Accounting principles and standards, such as Generally Accepted Accounting Principles (GAAP) in the United States or International Financial Reporting Standards (IFRS) globally, provide guidelines for how financial transactions should be recorded, summarized, and reported. There are various branches of accounting, including financial accounting, managerial accounting, tax accounting, and auditing, each serving different purposes within the realm of business finance.