Final accounts – an understanding – How it developed
In the last upload, as shared in the Learning & Development group, we read about the need for you as an individual to understand final accounts.
Another question is, why and how this developed over years.
Accounting has existed from times immemorial. Some form of accounting existed, primarily in form of accounting for receipts and payments recording, even in ancient India, from the times we see records in our books of history. The even say the “Zero” was invented / conceptualized in ancient India.
The modern day accounts are a results of theories built and developed in the last 100 years.
A number of bodies developed, a lot emanating from the British, in fact a lot of countries actually have principle accounting bodies named as “The Institute of Chartered Accountants of ________”
These bodies over the last 100 years or so, built mechanisms of recording and reporting financial status to those who needed it. The people who needed it were either a few interested people for a small business, to the general public for large business and social bodies. The governments needed the inputs for taxation purposes, the investors for assessing the value and returns of their investments, the customers and vendors for assessing whether the business entity was viable for transacting business with, the employee and the management for assessing whether it was worth working for the company to earn their daily livelihood and growth in the society.
So this entire requirement slowly resulted in three primary statements of accounts, which conveyed a lot of information to all such stakeholders. These statements shows the standing / strength of the company as on a certain date, the result of operations over a defined period, and whether the organization had enough liquidity for its day to day operations.
We will read about this next week, as to what these statements are.