What Is Accounting

Topics: Balance sheet, Income statement, Financial statements Pages: 3 (1052 words) Published: January 7, 2013
According to Weetman (2006 p25) ‘accounting is the process of identifying, measuring and communicating financial information about an entity to permit informed judgements and decisions by users of the information.’ If we extract the suffix of the word, we are left with the word ‘account’. To account for something is to take something into consideration. In terms of finance, accounting for something can be seen as baring it in mind when compiling financial information. Synony mously, taking something into account implies that you are mindful of something especially when you are about to make a decision. There are many different types of accounting. You have the standard tax and audit accountants, but the discipline also extends to more specified areas such as management accounting and forensic accounting. These different types of accounting produce a range of types of information which in turn are useful to different people. This therefore indicates that the meaning and motive behind the accounting practice varies depending on ones position within a business. The same financial statement (such as a balance sheet) will have different implications for different people. For example, if the balance sheet of Company X records a net loss of £100,000, to a manager this would indicate that somewhere along the lines, something has gone wrong. Whether the problem lies in the productivity of the staff, or that expenses outweigh income, a loss on the balance sheet would ordinarily lead a manager to implement new strategies in order to deal with the ‘problem’. However, if a company is in debt, generally speaking share prices will fall. The same balance sheet mentioned above may lead a shareholder to sell their shares. This shows that the accounting practice therefore no only affects different people in different ways but also affected different organisations and entities. If a company is registered as Privet limited Company (or an Ltd), financial information is...
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