Accountancy And Ratio Analysis

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Accountancy is a practice of recording, organizing, and reporting the financial transactions for a particular business. It assists in providing a true and fair view of the company to the management and its intended users. The term Accounting is a mixture of rational precision by studying facts and figures, both qualitative and quantitative, and also consists of fairly accurate quantification. Accountancy succeeds in achieving exactness and theories by thoroughly studying financial values and occurrences. Chambers and Dean (2000) have proposed that the practice of Accountancy follows Regulations, Judgement and Principles. The following essay tries to prove that Accountancy is more than basic calculations, rationally truthful and also based on…show more content…
Hopper, Northcott and Scapens (2009), suggest that high level evaluation is done while producing cost accounting and profit analysis. Accounting is not just arithmetic in nature, accounting methods such as cash and accruals help in recognizing expenses and revenue. In order to understand the status of a firm, ratio analysis is also conducted. Ratio analysis gives a clear present position of the company and helps in the operational and financial workings. According to the writings of Weetman (2013), ratios help a firm evaluate its own performance with previous figures or with its competitors. This indicates that accounting is more than basic calculations. The foremost purpose of accounting is to deliver sound economic decision making. Accounting achieves that by using advanced means to study information and have strategic control over operations and…show more content…
Basic mathematical or clerical errors could misstate certain items. It can be argued that accounting is a practice done by people; hence, there is always room for error and improvement. Accounting is a continuous cycle by which misstated items which went unnoticed can be noticed again by re-calculating, re-valuating, inquiring and observing by conducting analytical procedures on the financial information provided. To conclude, it can be stated that the quote "Accountancy is 50% low-grade arithmetic and 50% guesswork", argued by Richard Lewis (2014), does not prove to be an apt reflection of accountancy. In certain scenarios, accountants do precision guesswork due to unreliable information presented to them by sources. Accounting cannot be categorized as pure arithmetic math, as it involves complex calculations. Arithmetic calculation consists of basic math such as accumulation and deletion, whereas accountancy is a practice which takes account of financial and non-financial

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