The term "data" refers to primary details or numerical facts relating to an event or transaction. Data is stored and maintained on a computer or network. Computer Software like HiTech Financial Accounting process this electronic data. Data is also maintained as hardcopy or paper print. Since accounting limits itself only to those transactions and events which are financial in character, therefore, accounting data will consist of facts, financial in nature, relating to transactions and events of a business entity for the accounting period. Moreover, accounting data must be supported by documentary evidence. Thus, documents known as vouchers, support the data. Usually data is disorganized and disjointed in its raw form. It is not capable of being understood. So, accounting processes raw data into finished form of "information" to make it useful and meaningful, capable of being used in decision taking process by the various users of accounting information.

Thus accounting data processed by the accounting cycle produces accounting information. Data is collected, recorded, classified, grouped, valued, tabulated, arranged, summarized in order to present the same in the form of information for its use by the users to enable them to take decisions.

Cycle Trader

Accounting data Consists of financial transactions and events relating to an entity for the accounting period supported by documentary evidence (vouchers). For example receipts and payments are documented by payee's receipt purchases by invoice, sales by outwards invoice, returns inwards by credit note; returns outwards by debit note; expenses by bills or payment rolls etc.

Thus the first and the most important function of accounting is to collect the data supported by the vouchers to ensure the authenticity of the same. Accounting processes consist of recording in the books of original entry (journal or sub- journals); classifying (posting into ledger) grouping (putting transactions of similar nature at one place in one account) valuing (finding the value at year end by balancing or valuing) tabulating (preparing list of balances and checking arithmetical accuracy) and preparing financial statements (Trading and Profit and loss account; Balance Sheet) in report form to communicate the information.

Now-a-days computer accounting software can manage this task very efficient in a matter of short time. Accounting information is presented mostly in the form of financial statements like Income statement (Trading and Profit & Loss account) Position statement (Balance sheet). Now-a-days statement of changes in financial position; value added statement; report on Human resources accounting; Social performance report etc. form part of accounting information

Difference between Data and Information

Data

1. Refers to details, facts about any event.

2. Is, generally, disorganized and disjointed in the form.

3. Is in raw-form and is the input of accounting.

4. Cannot be understood or made use of by the users.

5. It does not depend upon information.

Information

1. Refers to only those events which are concerned with entity.

2. Is properly arranged, classified and organized.

3. Is in the finished form and is the output of accounting.

4. Is understood and used by the users of accounting information for taking their decisions.

5. Information is based upon and derived from data.

Parties interested in accounting information

Accounting information is of interest to various persons who are directly or indirectly concerned with an enterprise.

Management:

A small business is generally carried on by the sole trader or by the partners. But a large business is usually conducted by an incorporated company which separates management from ownership. Managers' responsibility is to operate the business efficiently and maximize the return on capital without jeopardizing the fund.

Management needs accounting information in

(1) selecting out of alternative proposals;

(2) controlling acquisition and maintenance of inventories (stock) cash receipts and payments;

(3) planning or budgeting for the future

(4) appraising the performance and

(5) devising remedial measures for the deviations of the actual results from the budgeted targets.

Owners:

Although owners initiate in contributing fund to the business yet they are the last to receive their claim on equity's return on their investment. This is true not only in repaying but also in rewarding their capital. After meeting all the charges including employees' salaries and lender's interest profit if any can be distributed as a reward on capital. Naturally, the owners are interested in the safety of their capital as also for a reasonable return thereon, which rest on the concern' s stability and prosperity. Accounting reports (annual) not only appraise the past performance but also assist in assessing future prospects of the entity. Such information is also very important for would-be-owners.

Creditors:

May be short-term viz, suppliers of goods, lenders of temporary advance or long-terms viz. mortgages, debenture holders etc. Although both are interested in the stability and earnings of the debtor firm yet the former specially looks to its short-term solvency i.e. liquidity whereas the latter is interested in long-term solvency of the firm.

Government:

Many products now-a-days are subject to excise-duty and sales Lax. Also the government regulates the prices of essential goods e.g.. drugs, vegetables, oil etc. So the Government is interested to know the costing information to administer excise duties and to regulate the prices of products. Government is also interested in the accounting information on the profits for income tax purposes.

Employees:

Steady employment and stability of business go together. Again trade unions are interested in sharing the profit of the firm in the form of bonus. Therefore, the employees are naturally interested in the accounting information provided by the annual accounting reports.

Consumers:

Price-increase is disfavored in almost all the quarters. Accordingly, a producer endeavors to reduce his product cost as also its selling price. Recently consumer protection associations have been formed to exercise control on the business and industry and also to make them aware of the "Social responsibility" towards society. Thus consumers also need accounting information.

Researchers:

The financial statements, being a mirror of business conditions are of inestimable value for research into business affairs. These statements are therefore of great interest to scholars undertaking research in accounting theory as well as business affairs and practices.

The nature of business income

One of the main objectives of financial accounting is to ascertain whether the business operations have been profitable or not. Accounting enables us to find out whether a business has earned profits or suffered losses during the accounting period.

Importance Of Data In Accounting And Parties Interested In Accounting Information

The accounting records of many smaller non-profit organisations such as clubs, cultural societies and small undertakings are often kept by means of a single entry accounting system. Nevertheless, details of the financial activities of such organisations and undertakings are available in different documents such as bank statements, invoices, accounts, wage sheets and minute books.

There are two major disadvantages to such incomplete (non-double entry basis) accounting records: (1) a great deal of useful information may be lost. It is possible to prepare financial accounting statements from the available information, but this may be more difficult than when complete records are available. Certain transactions may not be accounted for and there is also no continuity in the recording of financial and other useful information. (2) The advantages of the controls inherent in a double entry accounting system are lost.

Cycle Trader

A discussion of the treatment of incomplete records is useful for various reasons. First, it emphasises the advantage of a comprehensive double accounting system. Further, it is practical because accountants often have to prepare financial statements from such incomplete records, chiefly for income tax purposes. In practice, therefore, the conversion of single entry accounting information to a double entry basis is an analytical exercise. It may also happen that the double entry accounting records of an enterprise are lost (e.g. as a result of damage by fire) and the accountant must reconstruct them from incomplete records. Consequently, attention is given to certain aspects and practical procedures that arise as a result of keeping incomplete accounting records.

Assume that a trader has been in business for some time and that he wants to determine his interest in the undertaking at a specific date. In order to do this he must determine the total interest in the business and against this, bring into account any external interest. This can be done by, constructing an equity statement. (Basically, this contains the same information as the balance sheet, but is not prepared from balances of accounts in a double entry accounting system.)

The equity statement must be prepared by referring to any applicable information available. Keeping in mind that, undertakings that do not have formal accounting systems will find it necessary to keep records of certain basic information in order to conduct their business. For example, records of cash received and paid and amounts owing, both to and by the undertaking, are essential. Cash on hand can be determined by a cash count, cash in bank from the bank statement and amounts owing to and by the undertaking from invoices. Stock can be counted physically and the valued. The cost of fixed assets purchased can be determined from the supporting documentation. Owner's equity will be the difference between the values allocated to assets and liabilities.

The most practical method of determining net income or loss from incomplete accounting records is to analyse the change in owner's equity during any specific period. Obviously, owner's equity increases if a profit is made and when the owner makes additional investments in the undertaking. Conversely, owner's equity decreases as a result of losses and drawings by the owner.

Incomplete Accounting Records