Accounting was regarded to be an art, this could be noted from the following definition of accounting cited by the American Institute of Certified Public Accountants (AICPA):
Accounting is an art of recording, classifying and summarizing in significant manner and in terms of money. Transactions and events. Which are in part at least of a financial characters and interpreting the results thereof.
According to the American Accounting Associations (AAA) accounting defines as:
The process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information.
Therefore, the following functions could be closely related to accounting activity:
1 – Recording
Recoding is considered the basic function of accounting and it is essentially not only concerned with ensuring that all business transaction of financial character are actually recorded, but also that they are recorded in an orderly and systematically manner. Recording is done in the book which is called "journal".
This book may sub-divided in to subsidiary books such as purchases journal, cash journal, sales journal …. Etc. we must keep in mind that the number of subsidiary books will vary from business to business depending on the nature and the size of the business
2 – Classifying
Classification process is mainly concerned with the systematic analysis of recorded data. The classification process is done in the book named ledger. The ledger book consists of different pages individual account heads under which all financial transactions of one nature are collected.
3 – Summarizing
Summarizing process involves presenting he data in an understandable and useful manner to both internal and external users of accounting statements. Summarizing process will leads to the preparation of financial statements.
4 – Deals with financial transactions
Accounting deals and records only those transactions and events in terms of money which are of a financial character. Accordingly transactions which are not of a financial character are not recorded in the books of accounts.
5 – Interpretation
Interpretation is considered the final function and the end work of accounting. The recorded financial data is interpreted in a manner that allow the end-user to make a meaningful judgment regarding the financial condition and profitability of the business operations. The data is also used for the preparation of the future plans and its policies.
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