Accounting (or accountancy) is the process of managing finances through the recording, measuring, interpreting, and conveying of financial data. The term stems from the usage of financial accounts.
Accounting is also a field of study or specialization integral to the operation of all forms of organizations. Also known as “the language of business”, it maintains and processes all pertinent financial information required by an entity for intents of reporting and managing.
Different branches of accounting
- Financial Accounting – involves processes that record, classify, summarize, interpret, and communicate a business’ financial information.
- Management Accounting – involves information used in an organization, usually confidential and accessible only to a select group.
- Tax Accounting – involves compliance with tax regulations within the jurisdiction.
Investors, lenders, managers, and tax authorities among others, use accounting to allocate resources within and among entities such as agencies, companies and organizations.
Accountancy practitioners (known archaically as “bookkeepers”) are termed as accountants. Various professional bodies for accountants have long existed throughout the world. Early histories define the bookkeeper as an integral and valued member of an organization. As businesses evolved and became complex, and more cautious evaluation of financial data was required, the profession of public accounting arose.
Accountants usually have particular sub-specializations. Community colleges, four-year colleges, secondary schools, post-secondary business schools, and universities provide preparation for this line of work.
Accounting encompasses many disciplines including auditing, financial statement analysis, managerial accounting, and taxation.
Functions related to accounting include Cost Accounting, Financial Accounting, Financial Planning, and Not-for-profit Accounting.
The system central to modern financial accounting is known as double-entry bookkeeping. Two entries (at minimum) are involved in each transaction: a debit and a corresponding credit per account. Debit sums should always be equal to all credit sums, thus providing a straightforward method to verify errors.