Accounting in a very simple sense is maintaining a record of varied activities. Thus, Accounting is some things that are used almost by everyone in their daily lives. In our lifestyle, we maintain a record of varied transactions or activities. After going through this lesson you will understand Accounting Definition.
Accounting may be a process of identifying the events of monetary nature, recording them in Journal, classifying them in their respective ledgers, summarising them in Profit and Loss Account and Balance Sheet, and communicating the results to its users like proprietors, government, creditors, investors, etc.
According to the American Institute of Certified Public Accountants, 1941, “Accounting is that the art of recording, classifying and summarizing during a significant manner and in terms of money; transactions and events which are, partially a minimum of, of a financial character, and interpreting the results thereof.”
In the words of Bierman and Derbin, “Accounting may be defined as identifying, measuring, recording and communication of financial information.” In the opinion of Smith and Ashburne, “Accounting is the science of recording and classifying business transactions and events, primarily of a financial character, and therefore the art of creating significant summaries, analysis and interpretations of these transactions and events and communicating the results to persons who must make decisions or form judgment.”
Accounting cares about the economic activities of the business. Thus, transactions that can be measured in terms of money are recorded in Accounting. Transactions like the purchase of machinery, payment of salaries, wages, purchase of raw material, sale of goods, etc. all are examples of economic events.
The role of accounting has changed over the amount of your time. In the modern world, the role of accounting is not only limited to record financial transactions but also to provide information…