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.”