It is not easy to provide a concise definition of accounting since the word has a broad application
within businesses and applications.
The American Accounting Association define accounting as follows:
"the process of identifying, measuring and communicating economic information to permit
informed judgements and decisions by users of the information!.
This definition is a good place to start. Let's look at the key words in the above definition:
- It suggests that accounting is about providing information to others. Accounting information is
economic information - it relates to the financial or economic activities of the business or
- Accounting information needs to be identified and measured. This is done by way of a "set of
accounts", based on a system of accounting known as double-entry bookkeeping. The
accounting system identifies and records "accounting transactions".
- The "measurement" of accounting information is not a straight-forward process. it involves
making judgements about the value of assets owned by a business or liabilities owed by a
business. it is also about accurately measuring how much profit or loss has been made by a
business in a particular period. As we will see, the measurement of accounting information often