Financial Accounting

The purpose of any business is to make profits; for that, some business activities are to be conducted. You may be involved in transactions daily. Any human activity directed at making a profit is called business. Business is of different types. It may be a trading activity or manufacturing activity. Business may require capital, which may be the owner’s capital and borrowed capital. Transactions involve the exchange of value like the purchase of goods, the sale of goods for cash or credit, and the payment of expenses in the course of production and distribution.

History of Accounting

Accounting is as old as civilization itself. From the ancient relics of Babylon, it can be well proved that accounting did exist as long as 2600 B.C. However, in modern form, accounting based on the principles of the Double Entry System came into existence in the 17th Century. Fra Luka Paciolo, a mathematician, published a book De computic et scripturies in 1494 at Venice in Italy. This book was translated into English in 1543. In this book, he covered a brief section on ‘book-keeping’.

Origin of Accounting in India

Accounting was practiced in India thousands of years ago, and there is clear evidence for this. In his famous book Arthashastra, Kautilya dealt with not only politics and economics but also the art of proper keeping of accounts. However, accounting on modern lines was introduced in India after 1850 with the formation of joint-stock companies in India.

Accounting in India is now a fast-developing discipline. The two premier Accounting Institutes in India, viz., Chartered Accountants of India and the Institute of Cost and Works Accountants of India, are making continuous and substantial contributions. The International Accounts Standards Committee (IASC) was established on 29th June. In India, the ‘Accounting Standards Board (ASB)’ is formulating ‘Accounting Standards’ on the lines of standards framed by the International Accounting Standards Committee.