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Accounting For Managers - Basics of Accounting

Definition Of Accounting

   Posted On :  21.01.2018 06:35 am

Before attempting to define accounting, it may be made clear that there is no unanimity among accountants as to its precise definition. Anyhow let us examine three popular definitions on the subject:

Accounting has been defined by the american accounting association committee as:

 

“the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the

information”.

This may be considered as a good definition because of its focus on accounting as an aid to decision making.

The american institute of certified and public accountants committee on terminology defined accounting as:

 

“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 results thereof ”. of all definitions available, this is the most acceptable one because it encompasses all the functions which the modern accounting system performs.

Another popular definition on accounting was given by american accounting principles board in 1970, which defined it as:

 

accounting is a service society. Its function is to provide quantitative information, primarily financial in nature, about economic entities that is useful in making economic decision, in making reasoned choices among alternative courses of action”.

 

This is a very relevant definition in a present context of business units facing the situation of selecting the best among the various alternatives available. The special feature of this definition is that it has designated accounting as a service activity.

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