Meaning and Definition of Accounting
Accounting is the systematic process of identifying, measuring, recording, classifying, summarising, interpreting and communicating financial information. Accounting gives information on:
1. the resources available
2. how the available resources have been employed and
3. the results achieved by their use.
The profit earned or loss incurred during the accounting period, value and nature of assets, liabilities and capital can be ascertained from the information recorded in accounts.
According to the American Institute of Certified Public Accountants “Accounting is the art of recording, classifying and summarising in a significant manner and in terms of money, transactions and events which are in part, at least of a financial character and interpreting the results thereof”.
American Accounting Association has defined accounting as “the process of identifying, measuring, and communicating economic information to permit informed judgements and decisions by users of the information”.
a. From the above definitions, the following attributes of accounting emerge: Accounting is an art. It requires the expertise and skill of accountants to design accounting system and policies, to decide the accounting process in order to suit the requirements of an organisation.
b. The transactions or events of a business must be recorded in monetary terms.
c. Accounting process involves recording, classifying and summarising of transactions and analysis and interpretation of the results.
d. The results of such analysis must be communicated to the persons who are interested in such information.