MEANING OF ACCOUNTING
The committee on terminology set up by the American institute of certified public accountants formulated the following definition of accounting in 1961.
Accounting is the art of recording, classifying and summarizing in significant manner and in terms of money, transactions and events which are in part at least, of financial character and interpreting the result thereof.
As per this definition accounting is simply an art of record keeping. The process of accounting start by first identifying the events and transaction which are of financial character and then be recorded in the books of account. This recording is done in journal or subsidiary books, also known as primary books. Every good record keeping system includes suitable classification of transaction and events as well as their summarization for ready reference. After the transaction and events are recorded, they are transferred to secondary books i.e. ledger. In ledger transactions and events are classified in terms of income, expense, assets and liabilities according to their characteristics and summarized in profit and loss account and balance sheet.
“The process of identifying, measuring and communicating economic information to permit informed judgments and decisions by the users of accounts.”