Accounting - Definition, Characteristics and Branches

Accounting, definition;

ü  The process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information. (American Accounting Association)

ü  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. (American Institute of Certified Public Accountant )

ü  A service activity. Its function is to provide quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions—in making reasoned choices among alternative courses of action. (Accounting Principles Board)

ü  Popularly known as the language of business.

Characteristics of Accounting

1. It is executed through a cyclical process
2. It is follows the changes in business
3. It is about financial matters
4. It is a medium of communication
5. It is for making decisions

Some Bits about Accounting History

1. 1.    Luca Pacioli’s book Summa de arithmetica, geometrica, proportioni et proportionalita was printed and distributed throughout Europe in 1494. This is the reason why he named the Father of Accounting.
2. 2.    First accounting book in English language was authored by John Gouge in London in 1543.
3. 3.    In 1845, the first member of the Big 5 auditing firm, William Deloitte, opened his London firm. He was soon followed by Samuel Price and Edwin Waterhouse (1849), William Cooper (1854), and William Peat (1867).
4. 4.    Arthur Andersen, now a defunct auditing firm, computerized the payroll of General Electric Corp. in 1953, it begun the information age of accounting, now popularly known as Computerized Accounting.

Branches of Accounting and other related areas

1. Financial Accounting – a branch of accounting that deals with the accumulation and processing of information that will be contained in financial statements that will be periodically communicated to serve the needs of a variety of users.
2. Managerial Accounting – a branch of accounting that has to do with providing information to help meet the needs of managers inside an organization.
3. Cost Accounting – a branch of accounting that provides information to management about the different cost incurred by a business that is necessary in the planning and evaluation activities.
4. Assurance and Auditing – a related field of accounting which deals with reporting or improving the quality of information being provided by a certain party to another.
5. Taxation – a related field which deals with the power of the government to impose burden or charges upon persons, property or activities, for its use and support, in order for such to discharge appropriate function. 

Relationship between accounting education and businesses

Fields of Practices for Professional Accountants

1.  Public Practice (Public Accountants) - render professional services as a certified accountant, or offering or rendering or both, to more than one client on a fee basis or otherwise services such as;
1. Audit of financial transactions, records and reports
2. Design, installation, review and revision of an accounting system and controls
3. Representation in government agencies on tax and other accounting related matters.
4. Rendering professional assistance in matters relating to accounting procedures and the recording and presentation of financial facts or data.
2. Commerce and Industry (Private Accountants) – a person involved in decision making requiring professional knowledge in the science of accounting, as well as the accounting aspect of finance and taxation; or when such person represents his/her employer before government agencies on tax and other accounting related matters; or when such position requires that the holder must be a certified public accountant
3. Government Services – a person who holds or is appointed in an accounting professional group in government or in a government owned and/or controlled corporation including those performing proprietary functions, where decision making requires professional knowledge in the science of accounting; or where a civil service eligibility as a certified public accountant is a prerequisite.
4. Education/Academe – a person in an educational institution which involve teaching of accounting, auditing, management advisory services, accounting aspect of finance, business law, taxation and other technically related subjects.