Text 1. Accountancy
Accountancy or accounting is the system of recording, verifying, and reporting of the value of assets, liabilities, income, and expenses in the books of account (ledger) to which debit and credit entries (recognizing transactions) are chronologically posted to record changes in value (see bookkeeping). Such financial information is primarily used by lenders, managers, investors, tax authorities and other decision makers to make resource allocation decisions between and within companies, organizations, and public agencies. Accounting has been defined by the AICPA as " 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."
Financial accounting is one branch of accounting and historically has involved processes by which financial information about a business is recorded, classified, summarized, interpreted, and communicated; for public companies, this information is generally publicly-accessible. By contrast management accounting information is used within an organization and is usually confidential and accessible only to a small group, mostly decision-makers. Open-book Accounting aims to improve accounting transparency. Tax Accounting is the accounting needed to comply with jurisdictional tax regulations. Accounting scholarship is the academic discipline which studies the theory of accountancy.
Practitioners of accountancy are known as accountants. Professional bodies for accountants allow their members to use titles indicating their membership or qualification level: Chartered Certified Accountant (ACCA or FCCA), Chartered Accountant (FCA, CA or ACA), International Accountant (FAIA or AAIA),
Management Accountant (ACMA, FCMA or AICWA), Certified Public Accountant (CPA) and Certified General Accountant (CGA or FCGA).
The related, but separate financial audit comprises internal and external audit. External audit - carried out by independent auditors - examines the financial statements and accounting records in order to express an opinion as to the truth and fairness and adherence to Generally Accepted Accounting Principles (GAAP), or International Financial Reporting Standards (IFRS). Internal audit aims at providing information for management usage, and is typically carried out by employ Modern accounting
Accounting is the process of identifying, measuring and communicating economic information so a user of the information may make informed economic judgments and decisions based on it.
Accounting generally involves 5 major activities, these are:
· To collect financial information
· To record and store financial information
· To aggregate and organize financial information
· To present and report financial information to the public or anyone else in a way that is relatively easy to understand
· To keep companies and their managers/owners honest and truthful Accounting is the degree of measurement of financial transactions which are
transfers of legal property rights made under contractual relationships. Non-financial transactions are specifically excluded due to conservatism and materiality principles.
At the heart of modern financial accounting is the double-entry bookkeeping system. This system involves making at least two entries for every transaction: a debit in one account, and a corresponding credit in another account. The sum of all debits should always equal the sum of all credits, providing a simple way to check for errors. This system was first used in medieval Europe, although claims have been made that the system dates back to Ancient Rome or Greece.
According to critics of standard accounting practices, it has changed little since. Accounting reform measures of some kind have been taken in each generation to attempt to keep bookkeeping relevant to capital assets or production capacity. However, these have not changed the basic principles, which are supposed to be independent of economics as such. In recent times, the divergence of accounting from economic principles has resulted in controversial reforms to make financial reports more indicative of economic reality.
Critical approaches such as Social accounting challenge conventional accounting, in particular financial accounting, for giving a narrow image of the interaction between society and organizations, and thus artificially constraining the subject of accounting. Social accounting in particular argues that organizations ought to account for the social and environmental effects of their economic actions. Accounting should thus not only embrace descriptions of purely economic events, not be exclusively expressed in financial terms, aim at a broader group of stakeholders and broaden its purpose beyond reporting financial success.
