Definition of Accounting - Financial Accounting

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Accounting is a business language. We can use this language to communicate financial transactions and their results. Accounting is a comprehensive system to collect, analyze, and communicate financial information.

The origin of accounting is as old as money. In the early days, the number of transactions was very small, so every concerned person could keep a record of transactions during a specific period of time. Twenty-three centuries ago, an Indian scholar named Kautilya alias Chanakya introduced the accounting concepts in his book Arthashastra. In his book, he described the art of proper account keeping and methods of checking accounts. Gradually, the field of accounting has undergone remarkable changes in compliance with the changes happening in the business scenario of the world.

A bookkeeper may record financial transactions according to certain accounting principles and standards and as prescribed by an accountant depending upon the size, nature, volume, and other constraints of a particular organization.

With the help of the accounting process, we can determine the profit or loss of the business on a specific date. It also helps us analyze past performance and plan future courses of action.

Definition of Accounting

The American Institute of Certified Public Accountants has defined Financial Accounting as:

“the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which in part at least of a financial character and interpreting the results thereof.”