What is accounting?
Accounting can be defined as the measuring andrecording of all relevant financial data concerning a particular entity, thatis business, government organization, etc.
Financial reporting is the communicating ofsuch information in appropriately summarizing form. In the United Kingdom suchsummarised form is called “Accounts “. In the USA it is called “Financialstatements”. These accounts or statements are communicated to interestedparties both within and outside the organization. Financial reporting providesinformation that is useful to present and potential investors, creditors andother users in making rational investment, credit and other economic decisions.
Accounting is often referred to as the“language of business”. And, as a direct result of the work of accountants and auditors. A wide range ofdifferent users of financial reporting are able to answer questions such as:
How muchprofit did the company make last year?
How muchshould I lend to the company?
Is thiscompany more successful to the company?
Accountants ere therefore those individualsspecialized in the “art” of capturing the correct data, and preparing the most meaningful financialreports from that data. They are “producers” of financial information. Which isthen made available to “consumers” suchas owners and lenders.
Accountants are assisted in their work bybookkeepers, who operate some form of account system, usually computerized, tohelp capture, accumulate, categorise, summarise and report the many thousandsof transactions that affect an economic entity every year.