Accounting – Definition

What is accounting? I see a lot of people really get perplexed by this term “Accounting”. It is referred to as some extra-terrestrial by non-accounting professional, to the extent that a training module like “Accounting for non-accounting professional” is really a well-attended program.

But then again, is accounting that complex?

Accounting simply means maintaining a record of your financial / money based activities and transactions. Don’t we all do it? As children, we get pocket money, we retain some and spend some. In a notebook we write what we got and what we spent, and get pleased (or dis-pleased) by the balance left. As students, we do some activity, where we do some chores or conduct a dance show for the school or college, earn some money and then spend out of it, don’t we? When we get into a job or business, we do keep a track of what we got, what we spent and what really is our standing, or “net worth”

So, two key words here “earn” and “spend”. Which signifies “income” and “expenditure”. Again, simple English words.

Sometimes we buy a nice phone of the money collected, which will last a long time. So, it is an “asset” purchased and if Mom gave extra money to us, and we need to return it, that would be a “liability”

These are the basic accounting terms we start from. Now, coming back to the point – “What is accounting?” – In simple layman terms, it is the recording of all such events or “transactions” so that sat any point I know what my surplus is (or profit), what assets do I have and what do I owe to someone else.

Looks simple, well it is simple if you can understand the concepts……

More to follow…..

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