People sometimes confuse between accounting and mathematics although they are both extremely different.
It is honest that Accounting involves the employ of mathematics, but, only the basics are needed such as additions and subtractions.
Accounting is defined as an information system that Identifies, Records and Communicate economic events to involved users.
The users of accounting may be internal users such as the managers of the company or external users such as tax authorities, investors and creditors.
In order to understand these functions, bewitch a quickly food restaurant as an example:
1-Identify : The restaurant has made a sale of $1,000 of hamburgers today, paid salaries of $300 and purchased tools for $400
2-Record : In order to prevent loss of data, previous data must be recorded. In accounting financial data are recorded in a book called a journal .There are 2 types of journals
a-special journals :Certain accounts has a special journal such as Sales journal or Cash receipts Journal
b-General journal :For accounts that do not have a special journal such as depreciation.
3-Communicate : The most significant function of accounting is communication.
In accounting communication is done through the financial statements which are :
a-Income statement
b-Statement of changes in owners equity
c-Cash hasten statement
d-Balance sheet
Companies are required to prepare such statements and point to them to the public, so that investors can manufacture their wise investment based on the analysis of those statements..
After preparing the financial statements, an External auditor examines its accuracy, validity and reliability. It should be famous that auditing is different than accounting. The auditor starts when the accountant ends. As the accountant prepare the statements and the auditor revises such statements to check if it is apt and free from misstatements. The auditor then files a characterize indicating his conception about the pleasing presentation of the financial statements.
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