What is accounting? Meaning and Definition.

     "Accounting is the language of the business. 

Luca Pacioli is considered to be the father of accounting.  

Accounting is the process of recording, classifying and summarizing of business transactions in a significant and systematic manner is called Accounting. 

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We needn't go to the History of the accounting .so we directly learn the basic Introduction ,Meaning ,Definition and the main objectives of accounting. 

• INTRODUCTION  :

Business is an economic activity undertaken with the motive of earning profits and to maximize the wealth for the owners .Business cannot run in isolation.The business activities are carried out by people coming together with a purpose to serve a common cause. The basic purpose of a business is to add value to a product or service to satisfy customer demands...

                         Every business activities require resources ie. materials ,labour ,machinery, factories and other services. The success of business depends on how peoples are efficiently and effectively managed these resources. 

The professional accounting bodies have been doing intensive research to came up with accounting rules that will be applicable to us. The modern business is certainly more complex and continuous updating of these rules is required. 

 MEANING :

Accounting  is a systamatic process of  identifying, recording ,measuring, classifying, verifying ,summarizing ,interpreting and communicating financial information. It provides profit and loss for a given period of time and the value and nature of a firm's assets, liabilities and owner's equity.  

DEFINITION:

Accounting as "an art of recording, classifying and summarizing of business transactions in a significant manner and in terms of money is termed as Accounting.

Accounting or accountancy is the measurement, processing, and communication of financial and non financial information about economic entities, such as businesses and corporations. The modern field was established by the Italian mathematician Luca Pacioli in 1494. Accounting, which has been called the "language of business", measures the results of an organization's economic activities and conveys this information to a variety of users, including investors, creditors, managent, and regulators. Practitioners of accounting are known as accountants. The terms "accounting" and "financial reporting" are often used as synonyms.

Accounting can be divided into several fields including financial accounting, management accounting, external auditing, tax accountingand cost accounting

• The first step in the cycle of accounting is to identify transactions that which find place in the books of accounts. The transactions having financial impact only are to be recorded. 
• Secondly, the recording of the business transactions is done based on the Golden Rules of accounting in a systamatic manner. 

• Thirdly, as the transactions increased in number, it will be difficult to understand the combined effects of the same by referring to individual records.  

                    Therefore ,the art of accounting also involves the step of summarizing them.

• Lastly, the accounting process provides the people with a statements which will describe what has happened to the business .

It can be noted that although accounting is often referred tobas an art but it is a science also, this is because it is based on universal applicable set of rules. 

            However ,Accounting is both art as well as science. 

OBJECTIVES OF ACCOUNTING :

The main objectives of accounting is to provide financial information to stakeholders. This financial information is normally given via financial statements which are prepared on the basis of Generally Accepted Accounting Principles (GAAP).  

                The following objectives of accounting will explain the width of the application of this knowledge stream:-

1.To maintain full and systematic records of the business transactions 
 Accounting is the language of business transactions. Given the limitations of human memories, the main objectives of accounting is to maintain a full and systematic records of all business transactions. 
                          The fundamental role of accounting is to maintain a complete systematic, accurate and permanent record of all transactions of a business which could be retrieved and reviewed whenever necessary. 

2.To ascertain profit or loss of the business. 
 Business is run to earn profits. Wheather the business earned profit or incurred loss is ascertained by accounting by preparing profit and loss account or income statements. A comparison of income and expenditure gives either profit or loss. 

3.To know the financial position of the business. 
 A business is also interested in ascertain his financial position at the end of a given period. 
                             For this purpose a position statement called Balance sheet is prepared which shows the current position of assets and liabilities. 
4. To disclose information needed by different stakeholders. 
  Apart from the owner of the business enterprise, there are various stakeholders who are interested in accounting informations 
                         These are bankers, creditors, tax authorities , prospective investors ,researchers etc.  
           So one of the objectives of accounting is to make the accounting information available to these interested parties to enable them to take sound and realistic decisions.