What is the meaning of Accounting or Accountancy

Accounting or Accountancy is the process of transforming the Book-Keeping data into understandable financial information about a business entity to users such as shareholders and management. The communication between the Accountants and Management generally in the form of Financial Statements that show in money terms. The art lies in selection of Information that is relevant to the user and is reliable. The Principles of Accountancy are applied to business entities in three divisions of practical art, named Bookkeeping, Accounting, and Auditing.

The American Institute of Certified Public Accountants (AICPA) – “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.”

Accounts recording system found in Mesopotamia(Assyrians) date back more that 7,000 years. On that time, people relied on primitive Accounting methods to record the growth of crops and herds. Since then Accountancy improving over the years and advancing as business advanced.

In this modern trend Accounting is called as “The Language of Business” as every shareholder, entrepreneur, even small business people would understand and speak the basic Accounting terms. So, it plays the role of language among the different groups of people in the form of Financial Statements, and Reports. In order to satisfy needs of different people interested in the Accounting Information, different branches of Accounting have developed namely Financial Accounting, Cost Accounting, and Management Accounting.