At the end of this module

 The learners will define:

 accounting,
 describe the nature of accounting,
 narrate the history/origin of accounting,
 -define external users and gives examples, define internal users and give
examples
What is Accounting?
Accounting defines:

 As a system that helps businesses track events that affect them. This process
involves identifying the events that affect a business, recording these events,
and communicating the summarized results of all events within a particular
period to interested parties.
 Almost all companies allot a significant amount of resources to the accounting
process since it aids them in improving business. For example, the sale of
Toyota cars is identified as an economic event that affects the company. The
accountant will record this transaction and consolidate all records by the end
of the month. The consolidated records can be used by the top management
to identify potential problems encountered by the company. This can also be
used to a attract potential investors. Clearly, accounting process is very
beneficial to a company. We will further emphasize this point in the next
chapters.
The accounting process

 The starting point of the accounting process is the identification of economic events relevant to a
business. Examples of relevant economic events re the sale of Toyota cars (as mentioned), provision
of services by a hospital, payment to suppliers, and purchased of equipment for the manufacturing of
Bench shirts. To be identified as a relevant economic event, there should be a transfer of things with
value. Normally, for the purchased of equipment, cash or money is exchanged for the equipment. The
cash and equipment both have value making the purchase a relevant economic event. This analysis is
also applicable to the other examples given.
 The recording of relevant economic events is the next step in the accounting process. After a
company identifies the relevant economic events, it records those events which will serve as the
history of its financial activates. Recording events should be done systematically and chronologically.
For easier tracking and interpretation. Records of events are inputted in the so-called accounting
books.
 Finally after a lapse of a specific period (usually one year), companies summarize all the recorded
economic events into turning reports. The most popular accounting reports are the financial
statements. All similar events during the period are lumped together to provide meaningful and
presentable information. As such, all sales transactions during the period are added and presented as
one aggregate amount. This makes the information understandable to other parties.
Nature of Accounting:

 We know Accounting is the systematic recording of financial transactions and presentation of

the related information of the appropriate persons. The basic features of accounting are as
follows:
1. Accounting is a process: A process refers to the method of performing any specific job step
by step according to the objectives, or target. Accounting is identified as a process as it
performs the specific task of collecting, processing and communicating financial information.
In doing so, it follows some definite steps like collection of data recording, classification
summarization, finalization and reporting.
2. Accounting is an art: Accounting is an art of recording, classifying, summarizing and
finalizing the financial data. The word ‘art’ refers to the way of performing something. It is a
behavioral knowledge involving certain creativity and skill that may help us to attain some
specific objectives. Accounting is a systematic method consisting of definite techniques and
its proper application requires applied skill and expertise. So, by nature accounting is an art.
 3. Accounting is means and not an end: Accounting finds out the financial results and position
of an entity and the same time, it communicates this information to its users. The users then
take their own decisions on the basis of such information. So, it can be said that mere keeping
of accounts can be the primary objective of any person or entity. On the other hand, the main
objective may be identified as taking decisions on the basis of financial information supplied
by accounting. Thus, accounting itself is not an objective, it helps attaining a specific
objective. So it is said the accounting is ‘a means to an end’ and it is not ‘an end in itself.’
4. Accounting deals with financial information and transactions; Accounting records the
financial transactions and date after classifying the same and finalizes their result for a
definite period for conveying them to their users. So, from starting to the end, at every stage,
accounting deals with financial information. Only financial information is its subject matter. It
does not deal with non-monetary information of non-financial aspect.
5. Accounting is an information system: Accounting is recognized and characterized as a
storehouse of information. As a service function, it collects processes and communicates
financial information of any entity. This discipline of knowledge has been evolved out to meet
the need of financial information required by different interested groups.
Objectives of Accounting

 The functions of accounting facilitate the objectives of accounting. there are

many objectives of accounting. For instance,
 Accounting facilitates the systematic management of the records of the
transaction and other financial data.
 It gives an idea about the chances of profitability or failure or losses.
  The process assists the management by helping them to make the best decisions.
besides that, accounting ascertains the financial position of an organization.
  It also helps in the evaluation of the employee and their working efficiency, in
addition, communicating and spreading the accounting information to the user.
 Accounting contributes the biggest to any organization by preventing fraud and
prevents profit risks.
FUNCTIONS OF ACCOUNTING

 Accounting is a broad and varied profession. When you study accounting, you’ll find that
you can apply your education to a wide range of possible functions within a business. You
can specialize yourself to serve your employer, if not your own business, in a variety of
ways. You can also work in any industry and many departments within each of them.
Government work is also a common employment choice for accountants.
 Some accountants make their careers in the financial sector. They apply their ability to
analyze corporate health to deals that can include initial public offerings, mergers, and
acquisitions. These accountants don’t often engage in functions such as audits, but their
knowledge and expertise enable them to assess an auditor’s conclusions with an educated
eye.
 Other accountants perform more managerial functions. If you move your career in this
direction, you will be tasked with projects dealing with budgeting, maximizing efficiency,
checking for errors, or even theft in the system. Managerial accountants might also work in
information technology, where they audit an organization’s technological systems in search
of new ways to optimize workflow or overall efficiency.