Definition of Accounting

Definition of Accounting
Many authors have defined the term “Accounting” in different ways. There is difference of opinion among the authors as to its precise definition as the term accounting is so broad that it is difficult to give a precise definition. However, several possible definitions are given below:
1. “The act of collecting,   processing, reporting, analyzing, interpreting   and projecting   financial information”.
2.“The system of providing quantified information about an organization to people who need such information.”
3.“The process of identifying, measuring, and communicating   economic   information to permit informed judgments and decisions by users of the information.”

Of all the definitions available the most accepted is the one given by the American Institute of
Certified Public Accountants Committee, according to it:

     “Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events, which are, in part at least, of a financial character, and interpreting the result thereof.
Analysis of Definition
An analysis of the definition will enable us to have a thorough idea of the functions of accounting. The salient features of the definition are:

Accounting must be in relation to a monetary event or transaction and the event or transaction must be measurable in terms of money.  In other  words,  no accounting  is possible  for an event  or transaction which is  not measurable  in terms of money, e.g. passing  an examination,  delivering  lecture  in a meeting. Winning a game etc. These are events no doubt, but since these are not measurable in terms of money. There is no question of their accounting.                                                                                                                 
a)  Recording: In the first stage the transactions are recorded chronologically in the books of accounts.
b)  Classifying: In 
the  second  stage 
the  transactions  of the 
same  or  similar 
nature  are  classified 
and  recorded separately.

c)   Summarizing: In the third stage all the necessary  date and information  are summarized  on the basis of classified record of transactions and communicated  to management and other interested persons.
d)    Interpretation: In order to assertion the true position of a concern all the accounting data and information relating to it are analyzed and interpreted.

    All the above functions are performed
on the basis of certain well-defined and well-coordinated rules and
principles.  An accountant must be
familiar with all these rules and principles. 
In accounting we will study all these rules and principles.

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