Following are the characteristics of accounting:
1. Financial characteristic : Transactions or events, which are recorded in accounting, must be measurable in monetary value, e.g., 500 metre of clpth is purchased. This cloth is purchased for ₹ 50,000 which means that 500 metre cloth = ₹ 50,000. Rupee is money. Transaction made through money is known as economic transaction, which has financial characteristic.
2. Money as a medium of exchange:
Transactions or events recorded in accounting come into existence through the usage of money. Money as an exchange will be received by seller for 500 metre of cloth sold and by this money he can purchase any other product or service. In this manner money becomes medium of exchange for any transaction or event.
3. Classification and analysis of transactions : In a business different types of transactions take place like cash transactions, credit transactions or other special transactions, etc. These transactions are classified and analyzed on basis of their nature which is derived from debit-credit rules of accounting. Due to characteristic of classification and analysis, transactions of prescribed can be seen together at one place, e.g., What were opening balance of assets and debts? How many assets were purchased or sold? How many debts were taken or given ? What are closing balance of assets and debts ? Answers of all these questions are obtained because of classification and analysis.
4. Interpretation of transactions: Accounts are prepared according to specific rules and principles and then they are also interpreted on the basis of disclosed details and figures. Difference of expenses and incomes of a specific time duration decides profit or loss. With the interpretation of transactions results can be easily understood in accounting system.
5. Quantitative information : Quantitative information means numerical information. Information recorded in accounts is in the monetary form. So, this information is known as quantitative information.
6. Economic decisions : Different stakeholders take their decisions based on accounts prepared by accounting, e.g., Employees of a firm/company take decisions about salary, allowances, facilities on the basis of profit, while potential share-holders about investment, creditors about lending or selling take decisions and company itself makes decisions for its own development. Thus, accounting system is helpful to different parties to take economic decisions.
7. Historical information : The past always gives history. In accounting all past transactions and events are recorded. These past transactions or events become history. Past always discloses history. Accounts prepared on the basis of history represent historical information and results. Thus, accounting has relation with historical information.
