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What is Accounting

What Is Accounting:
The very first question that arises in the mind of a person related to accounting field is “What is accounting?” We all know accounting as a field of study as a subject but what it literally means, is hidden in the question and to answer the question let us give you an easy to understand accounting definition and explanation.



Accounting Definition:
Accounting is a process or a series of particular events in which firstly a bookkeeper or an accountant acquires financial data from a business entity. He or she then secondly maintains the record of the acquired financial data by entering them into the books (it may be an accounting software or a hard copy register) of the business. (The second step is known as bookkeeping). Thirdly the maintained record is then summarized for better view and understanding and last but not the least this summary then follows the rout to the table of the decision makers (Business owners, CPA’s, Auditors etc.) and completes the accounting process.
Accounting Definition
Accounting Definition

To be more precise we conclude the accounting definition as:

Accounting is a process that involves following steps;
  1. Acquisition
  2. Record maintaining
  3. Summarization; and
  4. Communication
of financial data of a business entity.


Explanation:
Financial information obtained from the business entity has the key importance in accounting process. So these four steps must be processed with extreme caution as they ultimately provide the base of decision making. When in fourth step the financial data is presented then it is used to make financial decision about the business entity either to continue, expand or to shut it down. The financial data must be complete, correct and accurately obtained and must also be rechecked again and again as all our economic and financial decisions are based on these financial information. The rationality of our economic and financial decisions about our business entity depends on the truthfulness of the financial information. The more the financial information is correct the more the economic decisions of business entity will be accurate resulting in profit for the business.

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