Fundamentals of

Accountancy, Business
and Management 1
 What is
Accounting?
 “It is a systematic process of identifying,
recording, measuring, classifying, verifying,
summarizing, interpreting and
communicating financial information.”
 It reveals profit or loss for a given period, and
the value and nature of a firm's assets, liabilities
and owners' equity.
Accounting provides information on the:
-resources available to a firm,
-the means employed to finance those
resources, and
-the results achieved through their use.
 “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
financial character and interpreting the
results thereof.”
American Institute of Certified Public Accountants
(AICPA):
 This definition of Accounting is centered
on the long-established bookkeeping
functions of accountants – to record, classify
and summarize business transactions and
events and afterward to interpret their
outcome.
 As an art, accountants apply practical
knowledge, experience and skills guided
by accounting principles and rules in the
efficient preparation of financial reports.
 Accounting demands critical
thinking and creative skills.
Accountants gather relevant data of
business and convert them into
organized financial reports then
draw certain economic meanings
from them.
Accounting gives due importance to the
measurement of business activities that
have monetary value. Business activities
that do not involve monetary value are
not recorded in the books of accounts.
Portrait of Luca Pacioli,
Accounting or accountancy is the
measurement, processing and communication of
financial information about economic
entities[1][2] such as businesses and corporations.
The modern field was established by
the Italian mathematician Luca Pacioli in 1494.[3]
Accounting, which has been called the
"language of business",[4] measures the results
of an organization's economic activities and
conveys this information to a variety of users,
including investors, creditors, management,
and regulators.[5]Practitioners of accounting are
known as accountants. The terms 'accounting'
and 'financial reporting' are often used as
synonyms.
Accounting can be divided into several fields
including financial accounting, management
accounting, auditing, and tax
accounting.[6]Accounting information systems are
designed to support accounting functions and
related activities.
Financial accounting focuses on the reporting of an
organization's financial information, including the
preparation of financial statements, to external users of
the information, such is investors, regulators And
suppliers;[7] and management accounting focuses on
the measurement, analysis and reporting of information
for internal use by management.[1][7] The recording of
financial transactions, so that summaries of the
financials may be presented in financial reports, is
known as bookkeeping, of which double-entry
bookkeepingis the most common system.[8]
Accounting is facilitated by accounting
organizations such as standard-
setters, accounting firms and professional
bodies. Financial statements are usually audited
by accounting firms,[9] and are prepared in
accordance with generally accepted accounting
principles(GAAP).[7]
GAAP is set by various standard-setting
organizations such as the Financial Accounting
Standards Board (FASB) in the United
States[1] and the Financial Reporting Council in
the United Kingdom. As of 2012, "all major
economies" have plans toconverge towards or
adopt the International Financial Reporting
Standards (IFRS).[10]
Practice and body of knowledge concerned
primarily with methods for:
-recording transactions,
-keeping financial records,
-performing internal audits,
-reporting and analyzing financial information to
the management, and
-advising on taxation matters.