What About The Nature And Scope Of Accounting?


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Connor Sephton answered
The nature and scope of accounting is all encompassing in the field of business and finance. This is because; accounting is a necessary tool for an individual or a business success.

Accounting is the systematic process of recording, organizing, classifying and summing up money, assets and liabilities of individuals, businesses and organizations. Accounting facilitates the preparation of financial statements as well as facilitating business transactions. Through accounting, the viability of a financial transaction or a business venture can be projected. Additionally, gains, losses and profitability can be determined.

The nature of accounting is basically to help individual, businesses and organization in the management of its finances. Accounting deals with financial position, its changes and performance. Accounting figures are vital to business and financial decisions which ranges from wealth allocation and investment to meeting demands.

Meanwhile, the scopes of accounting are inter-related and it includes:

  • Recording and classifying financial data. Financial transaction are recorded either through a single-entry or double-entry bookkeeping system. Additionally, this provides transparency both in the business and with the government. This is because the book of accounts are also filed with the necessary government agencies.
  • Information in accounting is relevant, comprehensive, reliable, complete, objective, timely and relevant and can be used as basis for comparison.
  • Measurement of the economic capabilities of the individuals and businesses. This involves: Taxes, wages and salaries, and dividends among others.
  • Responsible use and management of funds and assets in accordance to its specified uses.
  • Communication of accounting data through the financial statements. These financial statements in return will help in the decision making as to the allocation of financial resources and meeting the obligations incurred.
  • Accounting also involves auditing. Auditing is necessary to determine and establish the authenticity and consistency of the information in the accounting data.

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