1.

Identifying
O Economic events are identified and measured in terms of money.

2. Recording
O Accounting is an art of recording business transaction in the books of

accounts. Recording is the process of entering business transaction of financial character in the book of original entry , i.e. , in Journal.This book may be further sub-divided into various subsidiary books such as Cash Journal (for recording cash transactions), Purchases Journal (for recording credit purchases of goods), Sales Journal (for recording credit sales), etc.

3. Classifying
O Classification is the process of grouping transactions or entries

of one nature at one place. The transactions or entries of one nature at one place. The transactions recorded in the Journal or the subsidiary books are classified and posted to the main book of account known as Ledger. This book contains individual account heads under which all financial transactions of a similar nature are collected.

4. Summarising
O This involves presenting the classified data in a manner which is

understandable and useful to internal as well as external endusers of accounting statements.This process leads to the preparation of following statements: O (i) Trial Balance O (ii)Trading and Profit and Loss Account, and O (iii)Balance Sheet

5. Analysis and Interpretation

O The final stage is the acounting process is analysing and

interpreting the financial data contained in the final acoounts so that parties concerned with the business can make a meaningful judgment about the profitablility and financial position of the business unit.This helps in planning for the future in a better way.

6. Communicating

O Finally, the accounting function involves communicating the

financial data to users.

Communicating to the users

Fianancial Transactions or Events

Analysis & Interpretation

Summarising Trial Balance Trading & Profit & Loss Account Balance Sheet

Journal 1. Cash Book 2. Purchases Book 3. Sales Book 4. Purchases Return book 5. Sales Returns Book 6. Bills payable Book 7. Bills Receivable Book 8. Journal Proper

Recording

Classifying (Posting into Ledger)