1. Meaning of Accounting

Chapter 1:

Introduction to Accounting

MEANING OF ACCOUNTING

“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.”

Accounting is the process of recording financial transactions pertaining to a business. The accounting process includes summarizing, analyzing, and reporting these transactions to oversight agencies, regulators, and tax collection entities. The financial statements used in accounting are a concise summary of financial transactions over an accounting period, summarizing a company's operations, financial position, and cash flows.

NEED FOR ACCOUNTING

• In all activities and organizations (business or non-business) which require money and other economic resources, accounting is required to account for these resources.

• In other words, wherever money is involved, accounting is required to account for it.

• Accounting is often called the language of business. The basic function of any language is to serve as a means of communication. Accounting also serves this function.