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Accounting can be defined as the art of measuring, recording, communicating and processing financial information with the aim of aiding smooth decision making. First accounting practice is believed to originate from Italy at around 1400’s. Since then it has spread all over the world and now is commonly referred to as the language of business. Accounting measures the economic plausibility of the business and communicates this information to third parties who in turn make informed decisions.
Accounting standards are regulated by the International Financial Reporting Standard body. It lays down the rules and procedures which a business must adhere to when presenting its financial reports. Accounting firms help in auditing financial reports and ensuring that they are prepared as per the general accepted accounting principles (GAAP). Without this safeguard measures, some business may manipulate the financial statements to present wrong information to third parties.
Accounting is a broad field and is broken down to the following fields
- Financial accounting
It is the major branch of accounting that deals with reporting financial information at the end of financial period to external users such as government, creditors, potential investors and shareholders.
- Management Accounting
This branch involves collecting data, analyzing it so that important decision alternatives can be derived from it for use by internal management. The main aim of this data is to reduce the cost incurred by the organisation while maximizing the benefits.
This is the verification and assertion that the financial reports present a true state of affairs of the company that can be relied upon by third parties to make informed decisions. Auditing is usually conducted by an independent body usually an accounting firm.
This branch of accounting is concerned with the preparation, analysis and presentation of tax returns. Different countries have tax laws which firms must adhered to when presenting tax returns.
- Accounting information system
This is a new accounting branch that deals with the collecting and processing organization accounting data. We use different computer programs which to simplify the task of processing accounting data.
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