What is Accounting?

What is Accounting?

1. An Information System

   • Identifies
   • Records
   • Communicates

2. Identifying economic events involves

   • Selecting economic activities relevant to a particular entity
   • Examples of economic events
     • Sale of running shoes & sporting attire @ Nike
     • Payment of wages by Ford Motor Company
     • Collection of ticket sales and payment of expenses by major sporting clubs

3. Economic events are recorded to

   • Provide a history of the entity's financial activities
   • And involves
     • Keeping a systematic, chronological diary of events, measured in dollars and cents
     • Economic events are also classified and summarised

4. Financial information is communicated through

   • Accounting Reports
     • Financial Statements or Financial reports
     • Information resulting from similar transactions is accumulated and totalled

5. Reporting of recorded data is done in a standardised way

6. A vital element in communicating economic events is the accountant’s ability to analyse and interpret the reported information.

   • ANalysis involves
     • Ratios
     • Percentages
     • Graphs
     • Charts
     • To Highlight significant financial trends and relationships
   • Interpretation involves explaining
     • Uses
     • meaning
     • limitations
     • Of reported data