There are ranges of definitions associated with Accounting. Considering those definitions, Accounting is explained precisely in this way:
Accounting can be delineated as keeping or preparation of fiscal records associated with an entity taking into consideration, the examination, and authenticationplus reporting of those records as well. It also takes into account, the principles plus procedures of accounting with reference to the job responsibilities of an accountant. Accountancy actually refers to the profession of an accountant, predominantly in British English.
The Language of Business
Accounting, which is regarded as the speech(language) or tongue of Business, measures the results associated with the economic activities of an association and conveys the information to different users which include creditors, investors, management as well as regulators.
Practitioners associated with the subject of accounting are designated as accountants. The term accounting and financial reporting often served the purpose of synonyms.
Accounting can be classified into a number of fields which includes Financial Accounting, Management Accounting, External Auditing, Tax Accounting, and Cost Accounting. Information systems relating to Accounting are designed for the purpose of providing support functions associated with accounting and related activities.
Financial Accounting places its focus on an organization’s fiscal information including preparing financial systems to external informers or users who are better known as regulators, investors, and suppliers. Management accounting focus on the extent, examination and reporting of information concerned with inner use by management.
Recording of monetary transactions, so that summaries concerned with the financials may be displayed in fiscal reports, is known by the name of Book keeping. Of Book keeping, the most widespread system of importance is the Double-Entry Book keeping.
Progress of Accounting is smoothed by Accounting Organizations such as accounting firms, professional setters and standard-setters. Financial Statements are generally audited by firms associated with accounting (accounting firms), and are prepared according to the usually accepted principles of accounting better known as GAAP or Generally Accepted Accounting Principles.
GAAP is organized by various organizations concerned with standard-setting among which the Financial Accounting Standards Boards (FASB) deserves special mention in the States (US). FASB or the Financial Reporting Council of the United Kingdom is also worth of mention. As for the year 2012, it is known to all that all major economies hold respective plans to assemble on the way to or take on the International Financial Reporting Standards (IFRS).
History and origination
Now let’s have a glance at the history of Accounting. You will be acknowledged of the fact that Accounting is more than 1000 years old subject. Its origin can be traced to the Civilizations of the Old World. Yes! You have heard it right.
The early expansion of the idea and subject of Accounting dates back to prehistoric Mesopotamia, and was directly related to developments in counting, money as well as writing. Evidences of Book keeping in its early form have been discovered. There are also proofs of systems associated with auditing (auditing in its early form) developed by the Babylonians and Egyptians in ancient times.
During the reign of Emperor Augustus, the government of Rome had access to the detailed fiscal information.
Double-Entry Book keeping was initiated in Community of the Jews in the Middle East during the early phase of medieval period, which was later refined in Europe in the medieval era.With the emergence of Joint-Stock Companies, Accounting split into financial and management accounting respectively.
The foremost work associated with a system relating to Double-Entry Book Keeping was published in Italy by a well-known person associated with accounting. Infact, he is also called the Father of Accounting and his name is Luca Pacioli.
Accounting started its journey as a planned profession especially in the 19th century in collaboration with local proficient bodies in England which merge together to form the Institute of Chartered Accountants in 1880 (in England and Wales as well).
Financial Accounting places emphasis on reporting of an organization’s fiscal information to external users of the said information for instance,investors, potential investors as well as creditors.
It not only calculates but also records business transactions and organizes fiscal statements concerned with external users in conformity with usually accepted principles concerned with accounting (GAAP). GAAP, in turn occurs from the wide agreement betwixt theory of accounting and associated practiceswith change over time to meet the demands of decision-makers.
Fiscal Accounting produces reports that are past-oriented. For instance, economic statements prepared in 2006 provide information on presentation of the previous year (on a yearly or quarterly basis) normally about the organization altogether.
This branch associated with accounting is also studied as a part of the board exams for getting qualified as an actuary. These 2 kinds of experts, accountants, and actuaries deserve special mention in creating a culture of being archrivals.
Management Accounting lay its focus on the extent, scrutiny and reporting of information that can assist managers in their decision-making to fulfil the necessary goals associated with an organization. In Management Accounting, internal measures as well as reports are founded on the analysis relating to cost benefits, and are not required to follow the accounting principle that is commonly accepted. Here, you are informed about GAAP.
The year 2014 is especially noteworthy as it is marked with the creation of the Global Management Accounting Principles (GMAPs). The outcome of research from across 20 countries in five respective continents, the principles aim in guiding the best practice concerning the discipline.
Management Accountinginitiates reports that are necessarily future oriented. For instance, the yearly budget concerning 2006 is planned the year before i.e. 2005. The span of time associated with the report can extensively vary. These reports can include information that is not only financial but also non-financial. The reports can also hold the spotlight on specific products as well as departments.
Auditing is the process associated with the proof of assertions made by others concerning a payoff and in the perspective of Accounting; it is regarded as the independent assessment and evaluation of the fiscal statements concerned with an organization. Audit is actually a service associated with professionalism which is conventional and systematic.
An audit associated with financial statements always aims to express or disclaim a specific opinion related to financial statements. The assessor expresses a view on the justice with which the pecuniary statements present the fiscal position, results concerned with operations as well as cash flows associated with any entity, in keeping with GAAP and “in all material respects.” An examiner (auditor) is furthermore required to discover circumstances in which GAAP has not been consistently scrutinized.
Accounting information schemes
An Accounting information scheme serves importance being an integral part of the information scheme associated with a definite organization which concentrates on processing of accounting data. Several corporations make usage of the information systems that are based on artificial intelligence.
Banking as well as industries related to finance is accustomed to the use of AI associated with fraud detection. Retail business makes use of AI regarding its service to its customers. AI is also used by industry relating to Cyber security. It includes computer software and hardware systems with usage of Modelling and Statistics.
In the United States Tax Accounting focuses on the preparation, study and examination as well as presentation of payments associated with Tax and Tax Returns. The Tax system in the United States necessitates usage of specialized and focused principles related to accountingfor Tax purposes which can be at variance with GAAP for fiscal reporting. US Tax law has 4 basic forms associated with ownership in business in its coverage. These are:
- Sole proprietorship
- Company associated with restricted liability
Corporate income and personal income are taxed at different rates varying in accordance to the level of income thereby including average and marginal rates that can vary.
Forensic Accounting is related to a special area of practice associated with Accounting. It depicts engagements that arise from actual or predictable disputes (or litigation). The term “Forensic” implies anything that is suited to use in a court that is under State law. It is to that potential and standard result that Forensic accounts works in general.
Accounting Organizations of importance
Among these reputed institutes, there is the American Institute of Certified Public Accountants abbreviated as AICPA and the other one hundred and Seventy-nine members of International Federation of Accountants (IFAC) not excluding ICAEW or the Institute of Chartered Accountants (in England and Wales), ICAC or the Institute of Chartered Accountants of Scotland, Association of Chartered Certified Accountants, and CPA Australia.
Professional bodies associated with subfields of the professionals in the field of accounting also subsists for instance the Chartered Institute of Management Accounts in USA. Many of the certified institutes stated above offer education and guidance (training) which includes qualification and also administration related to different designations related to Accounting such as proficient (certified) public accountant plus chartered accountant.
Accounting network and associations
Accounting firms emerged in the United States as well as in Europe in the late 19th and in the early phase of the 20th century. A number of mergers encouraged the growth of large international accounting firms during the middle of the 20th century. To be precise, unification of several concerns paved the way to the growth of these global accounting firms.
Furthermore, large mergers in the late 20th century created a wider scope for the dominance of the audit market by 5 large Accounting firms. These are:
- Arthur Anderson
- Ernst & Young
The demise of Arthur Anderson after the “Enron scandal” led to closure of the first one and 4 large firms now dominate the market.
Accounting standard setters
Generally Accepted Accounting Principlespopularly abbreviated as GAAP are accounting standards issued the national authoritarian bodies. Additionally, IASB or the International Accounting Standards Board issue IFRS or the International Financial Reporting Standards put into practice by one hundred and forty-seven countries. Standards associated with intercontinental audit with assurance, Accounting related education, ethics, and public sector are all set by independent boards associated with standard settings supported by IFAC.
The International Auditing and Assurance Standards Board puts into practice international standards relating to auditing, quality control and assurance; the International Accounting Education Standards Board executesteaching (Education) standards relating to proficientaccounting; International Ethics Standards for Accountants sets globally accepted Code of Ethics for Professional Accounts based on apposite principles; International Public Sector Accounting Standards Board puts into practice accounting standards concerning public sector worldwide.
Organizations associated with individual countries may exude unique accounting standards. For instance, in USA, the Financial Accounting Standards Board displays the statements associated with Financial Accounting Standards (forms the basis of GAAP of the United States). In United Kingdom, the Financial Reporting Council executes accounting standards.
Degrees associated with Accounting: To get a decent job for the post of an accountant or an auditor one must have a bachelor’s degree (in accounting). Again, employers often demand a master’s degree. Obtaining a degree in accounting often necessitates fulfilling needs and wants concerning membership to specialized accounting associations.
For example, Education that is necessary for obtaining a degree in accounting can necessitate the need concerning American Institute of CPA’s one hundred and fifty semester hour plus associate partisanship with the authorized association of Public Accountants of the United Kingdom. It is possible after obtaining a degree in Accounting or Finance.
A doctorate degree is necessary for pursuing an academic career in Accounting. Doctorate in Business Administration and Doctorate in Philosophy are the most common degrees. While PhD is associated with academia, DBA programs focus on preparing Business Executives for their careers.
Maja Kazazic completed his MBA on Accountancy from the renowned Stanford University of California. Presently, he is working in collaboration with a popular venture associated with Accountancy with its Headquarters located in Toronto. He gathered a three year work experience to serve in a decent post concerning a job on Accountancy. He is in partnership with helpmeinhomework.com for some years and is guiding the students in pursuing various courses relating to Accountancy.