Accounting is the language of business. Language is a means of communication. Accounting is also communicating the results of business activities to persons involved in the process. Engineers should make sincere efforts to learn about a firm’s accounting practice so that they can better communicate with top management. Accounting studies are concerned with past and current financial events.
Accounting provides the necessary services of a business unit. Accounting is a source of much of the past financial data needed to make estimates of future financial conditions. Accounting is the pivotal source of data for further investigation.
A clear understanding of the origins and meaning of accounting data is needed in order to use or not use those data properly in making forecasting into the future and in comparing actual versus predicted results. This will help in planning future income and expenses.
In 1941 the American Institute of Certified Public Accounts (AICPA) defined accounting as follows: “Accounting is the art of recording, classifying and summarising in significant manner and in terms of money, transactions and events which are, in part, at least of a financial character and interpreting the results thereof”.
In 1966 the American Accounting Association (AAA) defined accounting as follows: “Accounting is the process of identifying, measuring and communicating economic information to permit informed judgements and decisions by users of the information”.
Thus accounting may be defined as the process of recording, classifying, summarising, analysing and interpreting the financial transactions and communicating the results thereof to the persons interested in such information.
