A system that helps businesses track events that affect them. It involves identifying the events, recording them, and communicating the summarized results to interested parties.
Accounting process
Identification of economic events relevant to a business
Recording of relevant economic events systematically and chronologically
Summarizing recorded economic events into accounting reports (e.g. financial statements)
Relevant economic events
Sale of Toyota cars
Provision of services by a hospital
Payment to suppliers
Purchase of equipment for manufacturing
For an event to be identified as a relevant economic event, there should be a transfer of things with value
Accounting books
Records where events are inputted
Accounting as a process
A process composed of multiple steps (identification, recording, communication) that lead to the common end goal of providing information
Accounting as an art
Accounting involves creativity and skills in recording, classifying, summarizing, and finalizing financial data
Accounting deals with quantifiable financial transactions and information
Accounting as a means, not an end
Accounting is a tool to achieve specific objectives, not the objective itself
Accounting as an information system
Accounting collects, processes, and communicates financial information to meet the needs of different interested groups
Functions of accounting
Keeping systematic record of business transactions
Protecting properties of the business
Communicating results to various parties
Meeting legal requirements
The history of accounting can be traced back to ancient civilizations like Mesopotamia and the Roman Empire
The double-entry bookkeeping system introduced by Luca Pacioli in the 14th century is considered the most important event in accounting history
The modern profession of chartered accountant originated in Scotland in the 19th century
Accounting standards like PFRS and PAS guide accountants in their practice of the profession
