The term “data” refers to raw details or numerical facts related to an event or transaction. The data is stored and maintained on a computer or network. Computer programs such as HiTech Financial Accounting process this electronic data. Data is also kept in hard copy or on paper. Since accounting is limited to only those transactions and events that are of a financial nature, accounting data will consist of facts, of a financial nature, related to transactions and events of a business entity during the accounting period. In addition, the accounting data must be supported by documentary evidence. Thus, documents known as vouchers support the data. Data is typically disorganized and disjointed in its original form. He is not able to be understood. Therefore, accounting processes the raw data in the finished form of “information” so that it is useful and meaningful, capable of being used in the decision-making process by the various users of accounting information.
Thus, the accounting data processed by the accounting cycle produces accounting information. The data is collected, registered, classified, grouped, valued, tabulated, ordered, summarized in order to present them in the form of information for use by users for decision making.
Accounting data Consists of financial transactions and events related to an entity during the accounting period supported by documentary evidence (vouchers). For example, receipts and payments are documented by payee receipt purchases by invoice, sales by external invoice, internal returns by credit note; returns abroad by debit note; expenses for bills or payroll, etc.
Thus, the first and most important function of accounting is to collect the data supported by the vouchers to guarantee their authenticity. The accounting processes consist of the registration in the books of the original entry (journal or subjournal); classify (post to the general ledger) group (put transactions of a similar nature in one place in an account) value (find the value at the end of the year by balance or valuation) tabulate (prepare a list of balances and check accuracy arithmetic) and prepare financial statements (Trading and Profit and Loss Account; Balance Sheet) in report form to communicate the information.
Today’s accounting software can handle this task very efficiently in a short time. Accounting information is mainly presented in the form of financial statements such as income statement (trade and profit and loss account) position statement (balance sheet). Current statement of changes in financial position; value added statement; report on human resources accounting; Social performance report, etc. are part of the accounting information
Difference between data and information
Data
1. Refers to details, facts about any event.
2. Is generally disorganized and disjointed in form.
3. It is in raw form and is the accounting entry.
4. It cannot be understood or used by users.
5. Does not depend on information.
Information
1. Refers only to those events that have to do with the entity.
2. Is duly ordered, classified and organized.
3. It is in finished form and is the result of accounting.
4. It is understood and used by the users of the accounting information for making their decisions.
5. Information is based on and derived from data.
Interested in accounting information
Accounting information is of interest to various people who are directly or indirectly related to a company.
Management:
A small business is usually carried out by the sole trader or by partners. But a large business is usually run by an incorporated company that separates management from ownership. The managers’ responsibility is to operate the business efficiently and maximize the return on capital without jeopardizing the fund.
Management needs accounting information in
(1) selection of alternative proposals;
(2) control of acquisition and maintenance of inventories (stock) receipts and cash payments;
(3) plan or budget for the future
(4) evaluate performance and
(5) devise corrective measures for deviations of actual results from budgeted targets.
Owners:
Although the owners initiate the contribution of funds to the business, they are the last to receive their claim on the return of capital on their investment. This is true not only in the payment but also in the reward of your capital. After all charges are met, including employee salaries and lender interest, if any, they can be distributed as a reward on principal. Naturally, the owners are interested in the security of their capital and also in a reasonable return on it, which is based on the stability and prosperity of the company. Accounting (annual) reports not only assess past performance but also help assess the entity’s future prospects. This information is also very important for potential owners.
Creditors:
They can be short-term, viz. providers of goods, lenders of temporary advances, or long-term, viz. mortgages, bondholders, etc. Although both are interested in the stability and profits of the debtor company, the former looks especially at its short-term solvency, i.e. liquidity, while the latter is interested in the long-term solvency of the company.
Government:
Many products today are subject to excise duties and Lax sales. The government also regulates the prices of essential goods, for example. drugs, vegetables, oil, etc. Therefore, the Government is interested in knowing the cost information to manage special taxes and to regulate the prices of products. The Government is also interested in accounting information on profits for income tax purposes.
Employees:
Stable employment and business stability go hand in hand. Once again, the unions are interested in sharing company profits in the form of bonuses. Therefore, employees are naturally interested in the accounting information provided by annual accounting reports.
Consumers:
The price increase is unfavorable in almost every quarter. Consequently, a producer strives to reduce the cost of his product and also its selling price. Recently consumer protection associations have been formed to exercise control over business and industry and also to make them aware of “social responsibility” towards society. Therefore, consumers also need accounting information.
Researchers:
Financial statements, being a mirror of business conditions, are invaluable in the investigation of business affairs. Therefore, these statements are of great interest to scholars conducting research in accounting theory as well as business issues and practices.
The nature of business income.
One of the main objectives of financial accounting is to determine whether or not business operations have been profitable. Accounting allows us to know if a company has made a profit or suffered a loss during the accounting period.