Accounting is an art of recording, classifying, summarizing and reporting of transactions with the aim of showing the financial health of an entity -- a business unit, a club, a charitable organization, etc., one which has its incomes and expenses. Accounting may be defined as a body of principles and conventions as well as an established general process for capturing financial information related to an entity's resources and their use in meeting the entity's goals. It is a field specialization critical to the functioning of all types of organizations. In a popular sense, accounting has been referred to as "the language of business "because of its role in maintaining and processing all relevant financial information that an entity require for its managing and reporting purposes. The American Insitute of Certified Public Accountants defines accounting as "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".
This definition brings out the following as attributes of accounting
i. Events and transactions of a financial nature are recorded while the events of a non - financial nature cannot be recorded.
ii. The record should reflect the importance of the transactions so recorded both individually and collectively, which includes summarization, thereby making it amenable to analysis.
The users of the financial statements should be able to obtain the message encompassed in such financial statements, and it is the knowledge of accountancy which enables the user to understand the contents of the financial statements.
This definition brings out the following as attributes of accounting
i. Events and transactions of a financial nature are recorded while the events of a non - financial nature cannot be recorded.
ii. The record should reflect the importance of the transactions so recorded both individually and collectively, which includes summarization, thereby making it amenable to analysis.
The users of the financial statements should be able to obtain the message encompassed in such financial statements, and it is the knowledge of accountancy which enables the user to understand the contents of the financial statements.
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