What is accounting

 

1.1 What is accounting

 

Accounting is the systematic process of recording, analyzing, interpreting, and reporting financial information of an organization or individual, primarily for the purpose of decision-making, financial reporting, and compliance with relevant laws and regulations. It involves the measurement, processing, and communication of financial data to internal and external stakeholders. Accounting provides essential information for businesses, investors, creditors, and other stakeholders to understand the financial health and performance of an entity.

One widely accepted definition of accounting is provided by the American Institute of Certified Public Accountants (AICPA), which states:

"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 financial character, and interpreting the results thereof." (AICPA, 2014) [1]

1.2  ACCOUNTING PROCESS

 

The accounting process is the series of steps followed by the business entity to record the business financial transactions that include steps for collecting, identifying, classifying, summarizing, and recording the business transactions in the books of accounts of the company so that the financial statements of the entity can be prepared. (Srivastav, 2021) As per the American Institute of Certified Public Accountants, "The accounting process is critical to the financial health of a business, enabling accurate financial reporting and decision-making" (AICPA, n.d.).

The relationship between these features is shown below,