Characteristics of Accounting

Characteristics of Accounting:

Characteristics of Accounting The following attributes or characteristics can be drawn from the definition of Accounting:

(1) Identifying financial transactions and events

  • Accounting records only those transactions and events which are of financial nature.
  • So, first of all, such transactions and events are identified.

(2) Measuring the transactions

  • Accounting measures the transactions and events in terms of money which are considered as a common unit.

(3) Recording of transactions

  • Accounting involves recording the financial transactions inappropriate book of accounts such as Journal or Subsidiary Books.

(4) Classifying the transactions

  • Transactions recorded in the books of original entry – Journal or Subsidiary books are classified and grouped according to nature and posted in separate accounts known as ‘Ledger Accounts’.

(5) Summarising the transactions

  • It involves presenting the classified data in a manner and in the form of statements, which are understandable by the users.
  • It includes Trial balance, Trading Account, Profit and Loss Account and Balance Sheet.

(6) Analysing and interpreting financial data

  • Results of the business are analyzed and interpreted so that users of financial statements can make a meaningful and sound judgment.

(7) Communicating the financial data or reports to the users

  • Communicating the financial data to the users on time is the final step of Accounting so that they can make appropriate decisions.
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