Accounting is a branch of economics whose purpose is to supply information in financial terms on the resources of an organization, on how past managerial decisions have influenced these resources and consequently it can be a useful instrument for decision-making concerning the allocation of resources for the future. As we see accounting looks both into the past and into the future of the resources of a company. The historical aspects are the concern of financial accounting, whereas the forecasts useful for future decision-making are the province of management accounting. The former type of approach is useful for the creditors and shareholders of a company, the latter is required by the managers.
Accountancy is the name of the profession and used only in the U.K. Ac
countants are professionals in the field of accounting. They usually belong to specialized bodies. Thus certified accountants are members of the Association of Certified Accountants (U.K.). They are recognized by the Department of Trade as qualified to audit the accounts of limited companies. Chartered accountants are members of one of the Institute of Chartered Accountants (in England and Wales, Scotland, Ireland). In the U.S.A the correspondent is the certified public accountant, a member of the American Institute of Certified Public Accountants. Accountants produce financial statements, draw up cash flow forecasts, audit accounts of organizations, prepare tax returns, and calculate production costs as well as overheads.
To be able to produce such financial documents they must rely on the recording of transactions in account books. Bookkeeping is a branch of accounting whose task is to record transactions. There are books of prime entry in which transactions are recorded in the order in which they are made. They are cash-books, daybooks, journals. Later the transactions are posted to the ledger. This is a book in which all the accounts of a business using double-entry bookkeeping are contained. It is the ultimate record book, showing all transactions of the business and their result. Nowadays many companies use computer-stored information instead of the classical ledger.
Finally, each entry is based on vouchers. These can be invoices and receipts. The latter is a confirmation of a payment made. The former is a document stating the amount due for some goods or services supplied. It gives a description of the goods, states delivery and shipment details, alongside of unit price and total price.
Accounting and Bookkeeping written by Cristina Nuta for FamousWhy.com
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