NATURE AND FUNCTIONS OF ACCOUNTING

DEFINITIONS OF ACCOUNTING

✍️Accounting refers to the mechanism of maintaining and keeping the records of the transactions and events and also its analysis and interpretation. It also includes the preparation of final accounts i.e. Trading , Profit or Loss Account and Balance Sheet (now Statement of Financial Position or Condition) at the end of the financial year. It is associated with communicating the interpreted results of the financial information to its users.

According to AICPA (American Institute of Certified Public Accountants)

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

According to AAA (American Accounting Association)

“Accounting is the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by the users of information.” 

According to APB (Accounting Principles Board)

“It is 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.”

According to RN Anthony

“Accounting system is a means of collecting, summarizing, analyzing and reporting in monetary terms the information of business.”

According to Bierman and Derbin

“It may be defined as the identifying, measuring, recording and communicating of financial information.”

According to Smith and Ashburne

“Accounting is the science of recording and classifying business transactions and events, primarily of financial character, and the art of making significant summaries, analysis and interpretation of those transactions and events and communicating the results to the persons who must make decisions to form judgments.”

Thus, Accounting is a system which involves the identification of transactions and events which are financial in nature; ensuring measurement of transactions in the monetary terms; recording the transactions in the journal; classifying the entries in ledger; summarizing the entries in final accounts i.e. Trading Account, Profit or Loss Account and Balance Sheet now Statement of Financial Position or Condition; analyzing and interpreting the results and communicating the results to the users of the information of accounts. “

Having shed light on the definitions of accounting, let us look at the nature of accounting in details.

NATURE OF ACCOUNTING

There are two attributes that describe the nature of accounting. Namely:

(a) Qualitative Attributives of Accounting

(b) Quantitative Attributives of Accounting 

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FUNCTIONS OF ACCOUNTING

Having shed light on the nature of accounting, let us look at the functions of accounting.

Yorston, Smyth, and Brown have divided functions of Accounting in two groups:

a. Historical or Stewardship functions of Accounting

b. Managerial Functions of Accounting

Let us put more light on the above functions mentioned by Yorston, Smyth, and Brown as it will be discussed in details.

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You may also find history of accounting in details interesting by clicking this link 👇

https://objunityonlineclasses.blogspot.com/2020/05/history-of-accounting.html
For users of accounting information, click this link👇
https://objunityonlineclasses.blogspot.com/2020/05/users-of-accounting-information.html