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Define Accounting
Accounting is a systematic process of identifying, measuring, recording, classifying,
verifying, summarizing interpreting and communicating financial information. It reveals
profit or loss for a given period and the value and nature of a firms assets, liabilities and
owners equity. In other words, it is just a method for recording transactions or keeping
financial records.
2. Purpose and Functions of accounting
The purpose of accounting is to accumulate and report on financial information about the
performance, financial position, and cash flows of a business. This information is then
used to reach decisions about how to manage the business, or invest in it, or lend money
to it. Accounting 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, in making reasoned choices among alternative course of
3. Branches of Accounting
a. Financial Accounting
It is the periodic reporting of a company's financial position and the results of operations
to external parties through financial statements, which ordinarily include the balance
sheet (statement of financial condition), income statement (the profit and loss statement,
or P&L), and statement of cash flow.
b. Management Accounting
It emphasizes the preparation and analysis of accounting information within the
c. Auditing
Auditing is the examination and verification of company accounts and the firm's system
of internal control.
d. Tax Accounting
It is determined by rules that seek to best portray the financial position and results of an
e. Fund Accounting
It is used for nonprofit entities, including governments and not-for-profit corporations.
Rather than seek to make a profit, governments and nonprofits deploy resources to
achieve objectives.
f. Forensic Accounting
It is the use of accounting in legal matters, including litigation support, investigation and
dispute resolution.