As an introduction to the course in accounting, it may be useful to define the following terms :
- Accounts : These are the financial records in the organization. Every business transaction, or accounting entity, may be represented in an account by itself, e.g. wages, telephone expense, motor vehicle, Cash at bank, Investment
- Book-keeping : This is the recording of the financial transactions of a business in a systematic manner, so that relevant financial data may be extracted when needed.
- Accounting : This is a more comprehensive step than book-keeping. It involves the classifying, recording, compiling, reporting and interpreting the financial activities in the organization. This allows the users of the information to make informed judgement, planning and decision regarding the organization.
- Accountancy : This is the procedure or the system that must be followed when recording, reporting, and interpreting the financial activities of the organization. It involves the set of principles or rules that must be observed in order to achieve an objective view of the accounting results.
Accounting in the fullest sense, is therefore the interactive and integrated process of reviewing, forecasting, planning, recording, classifying, reporting , and interpreting the financial activities in the organization. This allows the custodians to make informed judgments and decisions pertaining to the performance and financial position of the organization. It also facilitate those who may have a vested interest in the business to assess their relationship and expectations from the operations.
To this end accounting information should be
- Relevant : to the users so as to influence their ability to make informed decision
- Reliable :