Accounting

A definition of accounting is that it involves the recording of financial transactions as well as the storing, sorting, retrieving, summarising, and presentation of the information in a variety of reports and analyses.

The accounting profession consists of individuals having the required formal education and experience to carry out these important tasks. They qualify as an accountant.

The traditional part of accounting is focused on presenting financial information in the form of general purpose financial statements such as the balance sheet, income statement and cash flow statement to the public to fulfil legal oversight requirements. These external reports have to be be prepared in accordance with Generally Accepted Accounting Principles (GAAP). This part of accounting is referred to as financial accounting.

Accounting also involves providing a company’s management with relevant information to keep the enable sound business decisions which in turn keep the business financially healthy. Much of the internal analyses and reports such as budgets, financial controls, and sales estimates are of a strategic nature where the accountant plays a role in providing strategic advice and guidance to company management. This area of accounting is known as management accounting.

These days much of the actual record keeping occurs in accounting software programmes such as Quickbooks and Sage Pastel for smaller companies and SAP for larger ones.

Interesting to know: Double Entry Bookkeeping (Accounting 101)

On November the 10th 1494 Luca Bartolomeo de Pacioli published the Summa de Arithmetica, Geometria, Proportioni et Proportionalita (Everything About Arithmetic, Geometry and Proportion) which contained an essay about double entry bookkeeping. And so the modern accounting standard was born.