(i) A person who owns the business is called proprietor.
(ii) He contributes capital to the business with the intention of earning profit.

When goods meant for resale are sold, it is called sales

Cost Accounting involves the collection, recording, classification and appropriate allocation of expenditure for the determination of the costs of products or services and for the presentation of data for the purposes of cost control and managerial decision making.

(i) Financial Accounting involves recording of transactions and events which are financial in nature.
(ii) It provides financial information to the users for taking decisions
(iii) It ends up with the preparation of trading and profit and loss account and balance sheet.

There are three bases of accounting in common usage, namely
(i) Cash Basis
(ii) Accrual or mercantile basis
(iii) Mixed or hybrid basis

There are several persons who need the accounting information for various purposes. They can be classified into two.
(i) Internal users :
1. Owners
2. Management
3. Employees
(ii) External users :
1. Creditors and Financial institutions
2. Investors
3. Customers
4. General public
5. Tax authorities and regulatory bodies
6. Government
7. Researchers

Following are the objectives of accounting:
(i) To keep a systematic record of financial transactions and events
(ii) To ascertain the profit or loss of the business enterprise
(iii) To ascertain the financial position or status of the enterprise
(iv) To provide information to various stakeholders for their requirements
(v) To protect the properties of an enterprise and
(vi) To ascertain the solvency and liquidity position of an enterprise

The internal users comprise of owners, management and employees who are within the organisation.
(i) Owners:
1. The owners of a business furnish capital to be used for the purpose of business.
2. They are interested to know whether the business has earned a profit or loss during a particular period and also its financial position on a particular date.
(ii) Management:
1. Accounting data are the basis for most of the decisions made by the management.
2. The trends in sales and purchases, relationship of expenses to the turnover, productivity of workers, comparative profitability of different products and divisions etc.
(iii) Employees:
1. The employees are interested in the profit earing capacity of the business which will affect their salary, bonus, incentives and working conditions.
2. Labour unions use the accounting data in their bargaining strategies with the management.

(i) Transactions are those activities of a business, which involve transfer of money or goods or services between two persons, or two accounts.
(ii) For example, purchase of goods, sale of goods, lending of money, salaries paid, rent paid, commission received and dividend received.
(iii) Transactions are of two types, namely cash and credit transactions.
1. Cash transaction :
It is a transaction is which cash receipt or cash payment is involved.
2. Credit transaction:
It is a transaction in which cash is not received or paid immediately but will be paid or received later

(i) Accounting is the systematic process of identifying, measuring, recording, classifying, summarising, interpreting and communicating financial information.
(ii) Accounting gives information on :
1. the resources available
2. how the available resources have been employed and
3. the results achieved by their use.
(iii) The profit earned or loss incurred during the accounting period, value and nature of assets, liabilities, and capital can be ascertained from the information recorded in accounts.

The main functions of accounting are as follows:
(i) Measurement:
1. The main function of accounting is to keep systematic record of business transactions, post them to the ledger and ultimately to prepare the final accounts.
2. Accounting works as a tool for measuring past performance of the business enterprises.
(ii) Forecasting:
 With the help of the various tools of accounting, future performance and financial position of the business enterprises can be forecasted.
(iii) Comparison:
1. Accounting helps to assess the actual performance with the targets.
2. It also discloses the accounting policies.
(iv) Decision making:
1. Accounting assists the management in planning, evaluation of performance, control and decision making by providing required information to various users of accounts.
2. This will help them to take various decisions on cost, price, sales, volume, etc.
(v) Control:
1. As accounting works as a tool of control, the strengths and weaknesses are identified to provide feedback on various measures adopted.
2. It serves as a tool for evaluating compliance of business policies and programmes.
(vi) Assistance to Government regulations:
Government needs full information on the financial aspects of the business, so that proper tax can be levied on the income earned by the enterprises.

Accounting cycle is the sequence of steps involved in the accounting process. Accounting cycle starts with the identification and recording of financial transactions of an organisation and ends with the preparation of final accounts for the accounting year. The steps involved are:
(i) Identifying the transactions and journalising :
(1) The first step in the accounting process is identifying the financial transactions of a business.
(2) All the monetary transactions are recorded in the books of original entry called journals.  
(ii) Posting and balancing:
(1) Transferring the entries from the journal. to the ledger is called posting.
(2) In the ledger, entries are made in each account after classifying them under common heads. Finding the difference between the total of the debit column and credit column of all the ledger accounts is called balancing.
(iii) Preparation of trial balance:
(1) The list of ledger balances namely trial balance is prepared as the next step.
(2) On the basis of ledger balances the financial statements are prepared.
(iv) Preparation of trading account:
(1) Next step is preparation of trading account for a particular accounting period.
(2) All the direct revenues and direct expenses are transferred to trading account.
(3) The balance in the trading account is the gross profit or gross loss.
(v) Preparation of profit and loss account:
(1) Profit and loss account is prepared next for a particular accounting period.
(2) All the indirect revenues and indirect expenses along with gross profit or gross loss are transferred to profit and loss account.
(3) The balance in the profit and loss account is the net profit or net loss.
(vi) Preparation of balance sheet:
(1) A statement showing the balances of assets and liabilities namely balance sheet is prepared as the final step in the accounting process.
(2) It is prepared on a particular date, normally, on the last day of the accounting period.

(i) In the earliest days of civilisation, accounting was done by stewards who managed the properties of wealthy people. They rendered accounts periodically to the owners of property.
(ii) The stewardship accounting is said to be the root of accounting. Records of debit and credit were found in the 12^th century itself.
(iii) In 1494, Luca Pacioli an Italian developed double-entry book-keeping system.
(iv) Due to the industrial revolution in the 18th and 19^th centuries, large scale operations were carried on and joint stock companies emerged as an important form of organisation which required separation of ownership from management.
(v) Hence, to safeguard the interest of owners and investors, the business establishments required detailed information about business which paved the way for development of comprehensive financial accounting information system.
(vi) In the 20^th century, the need for analysis of financial information for managerial decision making caused emergence of Management Accounting as a separate branch of accounting.
(vii) Though accounting was individual centric in the initial stage of evolution of accounting, it has gradually developed into Social Responsibility Accounting in the 21^st century, due to the vast growth in business activities as a result of development in various fields.

An accountant designs the accounting procedures for an enterprise. He plays several roles in an organisation as follows:
(i) Record keeper :
1. The accountant maintains a systematic record of financial transactions.
2. He also prepares the financial statements and other financial reports.
(ii) Provider of information to the management :
The accountant assists the management by providing financial information required for decision making and for exercising control.
(iii) Protector of business assets :
The accountant maintains records of assets owned by the business which enables the management to protect and exercise control over these assets.
(iv) Financial advisor :
The accountant analyses financial information and advises the business managers regarding investment opportunities, strategies for cost savings, capital budgeting, provision for future growth and development, expansion of enterprise, etc.
(v) Tax Manager :
1. The accountant ensures that tax returns are prepared and filed correctly on time and payment of tax is made on time.
2. The accountant can advisee the managers regarding tax management, reducing tax burden, availing tax exemptions, etc.
(vi) Public relation officer :
The accountant provides accounting information to various interested users for analysis as per their requirements.

Importance of accounting is enumerated as below :
(i) Systematic records :
1. All the business transactions are recorded in the books of accounts.
2. Any event or happening which has financial effects is included in the accounting records.
(ii) Preparation of financial statements :
Results of business operations and the financial position of the concern are provided by accounting periodically through the preparation of financial statements namely profit and loss account and balance sheet.
(iii) Assessment of progress :
Analysis and interpretation of financial statements can be done to assess the progress made in different areas and it also identify the areas of weaknesses.
(iv) Information to interested groups :
Accounting supplies appropriate information to different interested groups 'like owners, creditors, management, employees, financiers, tax authorities, and government.
(v) Taxation :
Accounting records are the basis source for computation and settlement of sales tax, income tax, and other local taxes.