Learn the basics to intermediate of financial accounting in less than an hour!

The worldview of accounting and accountants may certainly involve some unhelpful characters poring over formidable figures stacked up in indecipherable columns.

However, a short and sweet description of accounting does exist:

Accounting is the language of business efficiently communicated by well-organised and honest professionals called accountants.

A more academic definition of accounting is given by the American Accounting Association:

The process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information.

The American Institute of Certified Public Accountants defines accounting as:

The art of recording, classifying, summarizing 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.

Accounting not only records financial transactions and conveys the financial position of a business enterprise; it also analyses and reports the information in documents called “financial statements.”

Recording every financial transaction is important to a business organisation and its creditors and investors. Accounting uses a formalized and regulated system that follows standardized principles and procedures.

The job of accounting is done by professionals who have educational degrees acquired after years of study. While a small business may have an accountant or a bookkeeper to record money transactions, a large corporation has an accounts department, which supplies information to:

• Managers who guide the company.

• Investors who want to know how the business is doing.

• Analysts and brokerage firms dealing with the company’s stock.

• The government, which decides how much tax should be collected from the company.

Principle of Accounting can also refer to the basic or fundamental principles of accounting: cost principle, matching principle, full disclosure principle, revenue recognition principle, going concern assumption, economic entity assumption, and so on.