The document discusses accounting, defining it as the process of identifying, measuring, recording, and communicating economic information about an organization to allow informed judgments and decisions. It explains that accounting involves identifying economic events, measuring them in monetary terms, recording transactions chronologically, and regularly communicating information to internal and external users through reports. The goal is to provide useful information for decision making, evaluating performance, and assessing future cash flows. Accounting has branches including financial, cost, and management accounting.

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Meaning of Accounting
• Accounting is “the art of
recording, classifying and
summarising in a significant
manner and in terms of money,
transactions and events which
are, in part at least, of financial
character, and interpreting the
results thereof.”(AICPA)
Introduction to accounting

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Definition of Accounting
• Accounting is “the process of
identifying, measuring and
communicating economic
information to permit informed
judgments and decisions by
users of information”
Introduction to accounting

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Process of Accounting
The accounting
process
Communicating
accounting
information
Decision-
makers(internal and
external users)
Economic
events

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Important
elements in
the definition
of accounting
Economic
events
Interested
users of
information
Organisation
Identification,
measurement,
recording and
communication

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An economic event is the happening
of consequence to a business
organisation which consists of
transactions and which are
measurable in monetary terms
Economic Events

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Economic
events
External
events
Internal
events

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Identification
• Identification means determining
what transactions to record.
• It involves observing activities and
selecting those events that are
considered financial character and
relate to the organisation.

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Measurement
• Measurement means
quantification of business
transactions into financial terms
by using monetary unit.

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Recording
• Once the economic events are identified and
measured in financial terms, these are
recorded in books of account in monetary
terms and in a chronological order.

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communication
• Accounting information is regularly
communicated through accounting
reports .
• The accounting information should
be designed in such a way that the
right information is communicated to
the right person at the right time.

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organisation
• Organisation refers to a business
enterprise. whether for profit or not-
for profit motive.
• It can be a sole proprietary concern,
partnership firm, co-operative society,
company, or any local authority

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Interested users of information
• Accounting is known as the language of business and
hence it is a means by which financial information about
business enterprise is communicated.
• Users of accounting information can be divided into two:
• Internal users and external users
• Internal users include-C E O, managers and supervisors
• External users include : shareholders, creditors,tax
authorities, labour unions, stock exchange etc.

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Accounting as a source of
information
Introduction to accounting

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Accounting as a source of information
Accounting information should ensure:
• Provide information for making economic decisions
• Serve the users who rely on financial statements
• Provide information useful for predicting and evaluating the amount, timing an
uncertainty of potential cash-flows:
• Provide information for judging management's ability to utilize resources
effectively in meeting goals.
• Provide factual information by disclosing underlying assumptions
• Provide information on activities affecting the society

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BRANCHES OF ACCOUNTING
Financial accounting
Cost accounting
Management accounting

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FINANCIAL ACCOUNTING
Financial accounting helps in
keeping a systematic record of
financial transactions and the
preparation and presentation of
financial reports

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COST ACCOUNTING
Cost accounting helps in
analyzing the expenditure for
ascertaining the cost of various
products manufactured or
services provided by the firm

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MANAGEMENT ACCOUNTING
Management accounting deals with the
provision of necessary accounting
information to people within the
organization to enable them in decision-
making, planning and controlling
business operations.

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QUALITATIVE CHARECTERISTICS OF ACCOUNTING
INFORMATION
RELIABILITY
RELEVANCE
UNDERSTANDABILITY
COMPARABILITY