The Government has made keeping of accounts mandatory for the registered charitable societies. Therefore, it becomes all the more important that we learn and understand accounting.
What is Accounting?
Accounting is the language of business. It measures business activities, processes data into reports and communicates results to decision makers. It is a process of identifying, recording, summarizing and reporting economic information to decision makers in the form of financial statements. It helps in decision making by showing where and how much money has been spent and the balance left, and how best to utilize it to achieve the goal of the business.
Basic Concept of Accounting:
Accounting follows the double entry system, i.e., for every debit there is a corresponding credit. Thus, debit and credit are the two aspects of every financial transaction. Every debit transaction must have a corresponding credit transaction and vice versa. A debit entry in an account represents a transfer of value to that account, and a credit entry represents a transfer from the account. A debit entry shows goods or value coming into the business and a corresponding credit entry shows goods or value going out of the business. If one item increases, the other item should decrease. For example, a transaction involving the purchase of stationery will mean stationery coming into the business and cash going out of the business. Here, with the purchase of stationery, the stationery item increases and cash automatically decrease due to the payment made.
Fr Alex G SJ
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