The meaning of accounting is broader than that of bookkeeping. Accounting includes not only book-keeping but also other activities. In records classifies and summarizes the financial transactions of a business with a view to ascertaining its profit or loss for the period and its financial position at the end of the period. Besides, It interprets and communicates information about the financial position of the business. Thus, accounting can be defined as a process of recording classifying, and summarizing financial transactions of a business in such a manner that the results of its operations and financial position can be ascertained at the end of a given period, and communicate to various users. Some famous definitions of accounting are as follows
The American Institute of Certified Public Accountants (AICPA):” 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.”
R. N. Anthony “An accounting stem is a means of collecting, summarizing, analyzing and porting, monetary terms, information about the business.”
Smith and Ashbourne: “Accounting is a science of recording and classifying transactions and events, primarily of a financial character and the art of making significant summaries, analysis, and interpretations of those transactions and events and communicating the results lo persons who must make decisions or form judgments.”
It is obvious from the above definitions that accounting is a broader term than accounting The recording and classifying aspects of accounting are fairly routine and are related to bookkeeping. However, the core aspects of accounting include summarization, presentation interpretation, and communication of the information provided by financial records, In simple words. Thus, accounting is the process of recording classifying, summarizing, and interpreting the financial information of a business for taking financial decisions
The following are the salient features of accounting
1. Science and art: Accounting is a science as well as an art. It is a science because it represents systematic knowledge and is based on a set of principles It is also an art because it involves practical work in which one can fully exercise judgment.
2. Process: Accounting is a process of systematic recording classifying and summarizing financial transactions, and interpreting financial information to the users.
3. Financial information: Accounting deals only with financial information. Any information which is not expressed in monetary terms is not considered in accounting.
4. Information system: Accounting is an information system. It uses financial transactions as inputs process them and provide financial information as to its output to the decision-maker.
5. Function: Accounting is a function therefore, identifies and gathers financial transactions, classifies, and summarizes them. Interprets and reports their results to the users