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Process of Accounting
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Process of Accounting
Input
Process
Output
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Input – Identifying Economic events which measures in Financial Terms.
Process – Recording - Classifying - Summarizing - Analyzing - Interpreting
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According to American Institute of Certified Public Accountants (AICPA), accounting is “the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part, at least, of a financial character and interpreting the results there of”
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Internal Users
External Users
USERS of Accounting
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Owners/Proprietors Managers Employees
Internal Users
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Creditors Prospective Investors Government Customers Researchers Foreigners Entrepreneurs Tax Authorities Trade Associates Stock Exchanges Media Political Parties & Others
External Users
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Cash Transaction Credit Transaction External Transaction Internal Transaction
Classifiction Of Business Transaction
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A transaction which involves immediate cash/cheque receipt or payment is called cash transaction.
For e.g. goods sold to X for cash Rs.5000
Credit TransactionAn external transaction not involving immediate
cash receipt or payment is called credit transaction.
E.g. Purchase of goods on credit from Y
Cash Transaction
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A transaction which involves the business entity and a second party is called an external transaction.
E.g. goods purchased on credit
Internal TransactionA transaction which doesn’t involve a second party
is called internal transaction.E.g. depreciation charged on machinery
External Transaction