What is accounting?
Accounting can be defined as the measuring and recording of all relevant financial data concerning a particular entity, that is business, government organization, etc.
Financial reporting is the communicating of such information in appropriately summarizing form. In the United Kingdom such summarised form is called “Accounts “. In the USA it is called “Financial statements”. These accounts or statements are communicated to interested parties both within and outside the organization. Financial reporting provides information that is useful to present and potential investors, creditors and other 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 of different users of financial reporting are able to answer questions such as:
How much profit did the company make last year?
How much should I lend to the company?
Is this company more successful to the company?
Accountants ere therefore those individuals specialized in the “art” of capturing the correct data, and preparing the most meaningful financial reports from that data. They are “producers” of financial information. Which is then made available to “consumers” such as owners and lenders.
Accountants are assisted in their work by bookkeepers, who operate some form of account system, usually computerized, to help capture, accumulate, categorise, summarise and report the many thousands of transactions that affect an economic entity every year.