Accounting is the language of the business because it communicates the story of the business. The Story of the business is communicated in 2 forms.
· Story of what has happened in the Business – This is communicated through Financial Accounting through the financial statements i.e. The Profit and Loss A/c and the Balance sheet.
· Story of Why and How things have happened to the business – This is communicated by the Cost $ Management Accounting.
P & L A/c tells us the Profit or Loss made by business during a particular period and the Balance sheet tells us what the business “Owns” in the form of Assets and what the business “Owes” in the form of liabilities as on a particular date.