Accounting is the process of preparing, recording, summarising and analysing the financial position and operating results. Accounting is also a profession comprising individuals who have obtained a formal education to perform accounting tasks.
Accounting is an essential process and the means of determining financial stability and it is the accountant who determines the overall wealth, profitability, and liquidity of a business.
Accounting has numerous sub-categories such as management accounting, financial accounting, tax accounting and auditing.
Accounting includes such activities as
- Measuring, analysing and reporting information to business managers to assist with decision making within an organisation to achieve its goals.
- The provision of financial information about an entity that is useful to external parties who make decisions about providing resources to that entity
- The preparation, analysis and submission of tax returns in accordance with relevant tax law
- Undertaking an unbiased examination and evaluation of an entity to provide a reasonable assurance that the financial statements of an entity are presented fairly in all material aspects
- General compliance with the statutory requirement of various regulatory bodies
While there are many layers or aspects of accounting they are all conducted in accordance with a standard set of accounting principles called GAAP or General Accepted Accounting Principles which all businesses follow. This consistency in the application of business accounting procedures will ensure that there is consistency in understanding the accounts regardless of the business.
Thus accounting is the basis upon which daily and long-term decisions are be made.