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ACCOUNTING: MEANING AND SCOPE
Accounting is a business language, that serves as a means of communication. This indicates that accounting acts as a means to know the financial health of the organization from the financial reports and the results thus generated.
At earlier stages, the chief objective of accounting was limited to determining the profit or loss for the period and to ascertain the financial state of affairs at a particular point in time. But as the scale of operations increased, a number of questions arose:
– What should be the selling price set by the company?
– What should be the cost incurred for production?
– Whether the cost incurred and the price charged are reasonable or not?
– Can the prices be reduced?
“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.”
– By American Institute of Charted Accountants
“Accounting is the science of recording and classifying business transactions and events, primarily of a financial character, and the art of making significant summaries, analysis and interpretation of those transactions and events and communicating the results to persons who must make decisions or form judgment.”
It is defined as “the art of recording, classifying and summarizing in terms of money transactions and events of a financial character and interpreting the results thereof.
In simple words we can say that-
- accounting is an art
- of recording, classifying and summarizing
- in terms of money
- transactions and events of financial nature and
- interpreting the results thereof.
