3 November 2021


Understanding Accounting

Accounting is a set of processes related to financial processes that occur in a business or organization.  The process consists of recording, summarizing, analyzing, and reporting data.  The following is an explanation of the four processes.

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Process in Accounting

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The first and most important process in an accounting process is the recording of various transactions made within the company.  It can also be referred to as bookkeeping which is the process of recognizing transactions and entering them as records.

Bookkeeping deals only with the recording segment and nothing else.  In accounting itself usually consists of many books for the sake of detailed recording.  Maintenance of this procedure occurs systematically.

The following are the 3 stages of recording financial transactions:

1. Using a system that will assist you in managing financial records.

2. Track financial transactions in detail.

3. Combine reports to present in a single set at the end of the financial statements.


Raw data is generally the result of recording transactions.  However, this raw data is not very important to the organization.  Raw data has no meaning in the decision-making process.

This is where an accountant works, dividing this raw data into categories and translating them.  So after recording the transaction, it can then be followed up by summarizing.


The affairs of the company are entirely the responsibility of management.  Business owners should know about the various operations that take place within the company and how the company uses their money.

To overcome this, the owner receives financial statements.  They receive these reports monthly, quarterly and annual reports summarizing all their performance.


In the end, analyzing is the end of every process you have done.  After recording and summarizing, it is very important to draw conclusions in a business.  Management is responsible for checking positive and negative points.

Therefore, to analyze all this, accounting introduces the concept of comparison.  Comparing profit, sales, equity, and so on with each other to determine and analyze performance, make decisions and make growth of a business organization.

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