INTRODUCTION TO ACCOUNTING

INTRODUCTION TO ACCOUNTING

Accounting is famously known as the "language of business". Through the financial statements, the end-product reports in accounting, it delivers information to different users.

Meaning of Accounting

• In 1941, The American Institute of Certified Public Accountants (AICPA) had defined accounting as 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 financial character, and interpreting the results thereof’. With greater economic development resulting in changing role of accounting, its scope, became broader. In 1966, the American Accounting Association (AAA) defined accounting as ‘the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of information’.
• In 1970, the Accounting Principles Board of AICPA also emphasised that the function of accounting is to provide quantitative information, primarily financial in nature, about economic entities, that is intended to be useful in making economic decisions.

Accounting can therefore be defined as the process of identifying, measuring, recording and communicating the required information relating to the economic events of an organisation to the interested users of such information. In order to appreciate the exact nature of accounting, we must

understand the following relevant aspects of the definition:

• Economic Events

• Identification, Measurement, Recording and Communication

• Organisation

• Interested Users of Information