Ethics of Accounting

   Ethics means morality. It deals with human conduct in relation to what is morally good and bad, right and wrong. It is applicable to values for decision making. These values include fairness, honesty, respect, responsibility, integrity and compassion.

Accounting ethics in the field of accounting means the guidelines that a professional needs to follow while practicing accounting. Or it is the distinct guidelines for a business or company to maintain clean and very accurate balance sheet;
accounting for the profits, losses and expenses incurred and stop it from mismanaging financial statements and reports.

For accountants, it is very important to understand laws, rules and regulations of their positions in their organizations. Any deviation from the ethics or its abuse can result in dire consequences for him, such as suspension of license, termination of their right to practice and other server penalties.

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         Qualities and Ethics of Accounting
An accountant is the officer in charge of the collection, recording, analysis and interpretation of financial information etc.
A good accountant must possess the following qualities:

1. Honesty: An accountant must be a sincere, truthful and straightforward person that people can depend on.
2. Integrity: An accountant should have integrity and be honest in all professional and business relationships.
3. Transparency: It includes making company records readily available to interested users and stakeholders such as investors and employees. this practice helps to demonstrate  to the stakeholders that the company is transparent and has nothing to hide.
4. Objectivity: A professional accountant should not allow bias  or undue influence of others to override business or professional judgement.
5. Professional competence: An accountant has a continuing right to maintain the professional knowledge at the level required to ensure that an employer receives competent professional service depending on current developments in practice, legislation and techniques. He should act carefully and in harmony with applicable professional and technical standards standards when providing services that are professional.
6. Confidentiality: An accountant should have regard for the confidentiality of all the information acquired due to professional and various business relationships and must not reveal any information of such to third parties without specific or professional authority except if there is a professional or legal right to disclose. Confidential information should not be used for the accountant`s personal advantage or third parties.

Benefits of Accounting Ethics 
The professional:

• It brings confidence to the noble profession.
• It assists accountant in charging remuneration.
• It is a guideline for all accountants to follow.

The Society:

• It saves the society from prominent scandals.
• Society places higher expectations on professionalism.
• The general public always expects various companies to present precise and accurate accounting of business activities.

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The Accounting Equation 
The totality of financial accounting depends on the accounting equation. The principle of double entry was developed from the axiom of accounting equation. The equation is given as:
Assets = Capital + Liabilities  

Assets:
These are properties of a business. They are owned and controlled by a business and are expected to be of future benefit e.g motor van, equipment, stock, land and building etc.
Capital:
This is the amount invested by the owner in a business. It is the proprietor`s fund or net worth of a business.
Liabilities:
This is an amount owed by a business to outsiders. It is an obligation to pay them in either money or anything else e.g creditors, loans etc.

 Sources of Assets 
(1) The owners or proprietors.
(2) Liabilities or claims to outsiders or creditors.
Hence, the claim of the owner of the business on the assets is called Capital. The claim on the assets from outsiders e.g suppliers of goods, bank loans etc can be referred to as Liabilities.