In layman terms, accounting is the process of recording all business transactions, following applicable accounting rules and standards.
Business accounting requires a high degree of technical knowledge and skills, and needs to be updated based on current and frequent amendments to accounting rules and regulations. Typically, business books are maintained according to the ‘double entry’ method, i.e. each transaction is recorded twice, as a ‘credit’ on one side and as a ‘debit’ on the other.
In other words, accounting is the process of segregating the payments and receipts to categories such as income, expense, assets and liabilities and recording to respective heads of accounts. Accounting results in preparation of trial balance at the year end and helps to prepare the Profit and Loss Account and Balance Sheet.
It is advisable to obtain professional help for keeping your business books. CompaniesInn provides all help and systems for maintaining books and records, including outsourced services for keeping books and papers.
Audit of Accounts
Audit of accounts is the process examining the financial situation of a business entity and to ensure the compliance in reporting standards of accounting. Audit of Accounts refers to verification of accounts by an independent professional to ensure the veracity of information and accuracy of data in line with reporting requirements of regulatory requirements.
The financial accounts of a Company have to be audited by a Chartered Accountant, who is a member of Institute of Chartered Accountants of India. The requirement of audit is applicable to all companies irrespective of size and turnover.
In case of LLP, the accounts of the LLP shall be audited by a qualified Chartered Accountant, if the annual turnover exceeds Rs.40 lakhs or contribution exceeds Rs.25 lakhs.
Where annual turnover of a Company or LLP exceeds is Rs.100 Lakhs or more, there is an additional requirement of audit under Income Tax Act by a Chartered Accountant and the report to be submitted along with the Annual Tax Returns.