History and Meaning of Accounting

Accounting is thousands of years old and can be traced to ancient civilization. The early development of accounting dates back to ancient Mesopotamia and is closely related to development in writing ,counting , money and early auditing systems by ancient Egyptians and Babylonians.

Accounting as a field of study and a profession has several definitions. Accounting is the process of identifying, measuring and communication of economic information of financial character to permit informed judgement and decisions by the users of the information. It is the art of collection, recording, classifying, summarizing and communication 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 result thereof

An analysis of the above definitions bring out the following functions.

FUNCTIONS OF ACCOUNTING

1. Recording: It is concerned with ensuring that all business transactions that are of financial character are recorded in an orderly manner. This is done in journals.

2. Classifying: This involves the systematic analysis of the recorded data, with the aim of grouping transactions or entries of one nature at one place. This function is done in ledgers.

3. Summarizing: This function involves the presentation of classified data in a manner which is understandable and useful to the internal and external end users of accounting statement.

4. Dealing with financial transactions: Accounting records only transactions that can be measured in monetary terms which are of financial character. Other transactions of no monetary value are not recorded.

5. Analyzing and interpreting : This involves analysis and interpretation of the recorded financial data in a manner that will permit the endusers to make meaningful judgment about the financial and profitability of the business operation

6. Communication : The accounting information after being analyzed and interpreted has to be communicated to the appropriate persons.

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