Features of Accounting


Accounting is basically known as the language of business. The Accounting system is a man-made system has evolved over a period of time to provide financial information to users of financial statements.

It can be defined as a systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating financial information. 

It plays an important role in smooth functioning of business organisation through systematic recording of business transactions.


The following are the main features of accounting :-

  • Recording of Financial Transactions only :- Only those transactions which are financial in nature are recorded in account ting. For example :- purchases of goods of Rs 50,000.
  • In Monetary terms only :- All the transactions are recorded in the books of accounts in terms of money. For example sale of furniture for Rs 10,000 etc.
  • Classifying :- After recording the transactions, the business transactions are classified. Classifying is the process of grouping transactions or entries of the same type at one place. This is done by opening accounts in a book called ledger. Ex – Purchases A/c , Ram A/c etc.
  • Summarising :- Summarising is the art of presenting the accounting data in such a manner that it is understandable to all the users. Generally, final accounts i.e Trading & p/l account and Balance sheet are prepared for summarizing.
  • It is an art of interpreting the result :-Accounting is also an art to determine the financial position of the business, the progress made and how well it is getting along.
  • Communication :- After properly being analysed and interpreted , the accounting information has to be communicated in proper form to the proper person. This is done through preparation and distribution of accounting reports such as accounting ratio, graphs, diagrams etc.


Thus, in a nutshell, Accounting is a process in which the transactions are identified, recorded, arranged, summarized, simplified properly and then communicated to the interested parties.

Also Like:


Please enter your comment!
Please enter your name here




Provision Coverage Ratio in detail

To tackle the NPA or bad assets problem in the banking sector, RBI has designed several mechanisms. Among these, the most important one is...

What is FEMA Act 1999 ?

Foreign Exchange Management Act, 1999 (FEMA) came into force by an act of Parliament & came into effect from 1st June, 2000. FEMA Act was...

Yield to Maturity ( YTM )

YTM is nothing but the internal rate of return (IRR) of a bond. It is also known as redemption yield. Yield to maturity is the...

Negative Lien in detail

WHAT IS LIEN ? A lien is a right of a person to retain a property which is in his ownership or possession till such...