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1、1The Nature of Accounting Accounting is often called the “language of business”. A language is a means of social communication and involves a flow of information from one person to one or more other persons. To be effective, the receiver of the information must understand the message that the sender
2、 intends to convey. Accounting uses its own special words and symbols to communicate financial information that is intended to be useful for economic decision-making by managers, shareholders, creditors and many others. As you study accounting, you must learn the meanings of these words and symbols
3、if you want to understand the messages contained in financial reports. Everyone involved in business, from the beginning employee to top manager, eventually uses accounting information in decision-making process.The importance of understanding accounting information is not restricted to those engage
4、d directly in business. Many people with little knowledge of accounting must interpret accounting data. For example, lawyers must understand the meaning of accounting information if they are to represent their clients effectively, marketing consultants must aware of the costs of developing advertisi
5、ng campaigns, and engineers and architects must consider cost data when designing equipment and buildings. In fact, every person engages in transactions dealing with the financial aspects of life. Thus, accounting plays a significant role in 2society and, in a broad sense, everyone is affected by ac
6、counting information. The better you understand the language, the better you can manage the financial aspects of living.Early definitions of accounting generally focused on the traditional record-keeping functions of the accountant. In 1941, the American Institute of Certified Public Accountants (AI
7、CPA) defined accounting as the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character, and interpreting the results therefore. The modern definition of accounting, however, is much br
8、oader. In 1970, the AICPA stated that the function of accounting is to provide quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions.The modern accountant, therefore, is concerned not only with record keeping but a
9、lso with a whole range of activities involving planning and problem solving, control and attention directing; evaluation, review, and auditing. The new focus of accounting is on the ultimate needs of those who use accounting information, whether these users are inside or outside the business itself.
10、 So accounting is an information system that identifies, measures and records business activities, processes the information of those activities into reports and financial statements, and communicates these findings to decision-makers. Financial statements are the documents 3that report on an indivi
11、duals or an organizations business in monetary amounts.In our business making a profit? Should we start up a new line of womens clothing? Are sales strong enough to warrant opening a new branch outlet? The most intelligent answers to the business questions like these are based on accounting informat
12、ion. Decision-makers use the information to develop sound business plans. As new programs affect the businesss activities, accounting takes the companys financial pulse rate. The cycle continues as the accounting system measures the results of activities and reports the results to the decision-maker
13、s.Bookkeeping is a procedural element of accounting as arithmetic is a procedural element of mathematics. Increasingly, people are using computer to do much of the detailed bookkeeping work at all levels-in households, business, and organizations of all types.It is important to clarify the relations
14、hips of accounting to bookkeeping and the computer to avoid certain misunderstanding about accounting. People often fail to understand the difference between accounting and bookkeeping. Bookkeeping, which is a process of accounting, is the means of recording transactions and keeping records. Mechani
15、cal and repetitive, bookkeeping is only a small, simple part of accounting. Accounting, on the other hand, includes the design of an information system that meets users needs. The major goal of accounting 4is the analysis, interpretation, and use of information. Accountants look for important relati
16、onships in the figures they produce. They are interested in finding trends and studying the effects of different alternatives. Accounting includes system design, budgeting, cost analysis, auditing, income tax preparation or planning and computer programming. The computer is an electronic tool that can collect, organize, and communicate vast amounts of information with great speed. Accountants have been among the earliest and most enthusiastic users of computer. Before th
