Accounting

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Accounting or accountancy is the measurement, processing, and communication of financial and non financial information about economic entities[1][2] such as businesses and corporations. Accounting, which has been called the "language of business",[3] measures the results of an organization's economic activities and conveys this information to a variety of users, including investors, creditors, management, and regulators.[4] Practitioners of accounting are known as accountants. The terms "accounting" and "financial reporting" are often used as synonyms.

Accounting can be divided into several fields including financial accounting, management accounting, external auditing, tax accounting and cost accounting.[5] Accounting information systems are designed to support accounting functions and related activities. Financial accounting focuses on the reporting of an organization's financial information, including the preparation of financial statements, to the external users of the information, such as investors, regulators and suppliers; and management accounting focuses on the measurement, analysis and reporting of information for internal use by management. The recording of financial transactions, so that summaries of the financials may be presented in financial reports, is known as bookkeeping, of which double-entry bookkeeping is the most common system.[6]

Accounting has existed in various forms and levels of sophistication throughout human history. The double-entry accounting system in use today was developed in medieval Europe, particularly in Venice, and is usually attributed to the Italian mathematician and Franciscan friar Luca Pacioli.[7] Today, accounting is facilitated by accounting organizations such as standard-setters, accounting firms and professional bodies. Financial statements are usually audited by accounting firms, and are prepared in accordance with generally accepted accounting principles (GAAP). GAAP is set by various standard-setting organizations such as the Financial Accounting Standards Board (FASB) in the United States and the Financial Reporting Council in the United Kingdom. As of 2012, "all major economies" have plans to converge towards or adopt the International Financial Reporting Standards (IFRS).[8]

Accounting related topics[edit]

History[edit]

Portrait of Luca Pacioli, painted by Jacopo de' Barbari, 1495, (Museo di Capodimonte).

Accounting is thousands of years old and can be traced to Ancient civilizations.[9][10][11] The early development of accounting dates back to ancient Mesopotamia, and is closely related to developments in writing, counting and money;[9] there is also evidence of early forms of bookkeeping in ancient Iran,[12][13] and early auditing systems by the ancient Egyptians and Babylonians. By the time of Emperor Augustus, the Roman government had access to detailed financial information.[14]

Double-entry bookkeeping was pioneered in the Jewish community of the early-medieval Middle East[15][16] and was further refined in medieval Europe.[17] With the development of joint-stock companies, accounting split into financial accounting and management accounting.

The first published work on a double-entry bookkeeping system was the Summa de arithmetica, published in Italy in 1494 by Luca Pacioli (the "Father of Accounting").[18][19] Accounting began to transition into an organized profession in the nineteenth century,[20][21] with local professional bodies in England merging to form the Institute of Chartered Accountants in England and Wales in 1880.[22]

Terminology[edit]

Accounting has variously been defined as the keeping or preparation of the financial records of transactions of the firm, the analysis, verification and reporting of such records and "the principles and procedures of accounting"; it also refers to the job of being an accountant.[23][24][25]

Accountancy refers to the occupation or profession of an accountant,[26][27][28] particularly in British English.[23][24]

Education, training and qualifications[edit]

Degrees[edit]

At least a bachelor's degree in accounting or a related field is required for most accountant and auditor job positions, and some employers prefer applicants with a master's degree.[29] A degree in accounting may also be required for, or may be used to fulfill the requirements for, membership to professional accounting bodies. For example, the education during an accounting degree can be used to fulfill the American Institute of CPA's (AICPA) 150 semester hour requirement,[30] and associate membership with the Certified Public Accountants Association of the UK is available after gaining a degree in finance or accounting.[31]

A doctorate is required in order to pursue a career in accounting academia, for example to work as a university professor in accounting.[32][33] The Doctor of Philosophy (PhD) and the Doctor of Business Administration (DBA) are the most popular degrees. The PhD is the most common degree for those wishing to pursue a career in academia, while DBA programs generally focus on equipping business executives for business or public careers requiring research skills and qualifications.[32]

Professional qualifications[edit]

Professional accounting qualifications include the Chartered Accountant designations and other qualifications including certificates and diplomas.[34] In Scotland, chartered accountants of ICAS undergo Continuous Professional Development and abide by the ICAS code of ethics.[35] In England and Wales, chartered accountants of the ICAEW undergo annual training, and are bound by the ICAEW's code of ethics and subject to its disciplinary procedures.[36]

In the United States, the requirements for joining the AICPA as a Certified Public Accountant are set by the Board of Accountancy of each U.S. state|state, and members agree to abide by the AICPA's Code of Professional Conduct and Bylaws.

The ACCA is the largest global accountancy body with over 320,000 members and the organisation provides an ‘IFRS stream’ and a ‘UK stream’. Students must pass a total of 14 exams, which are arranged across three papers.[37]

See also[edit]

References[edit]

  1. Needles, Belverd E.; Powers, Marian (2013). Principles of Financial Accounting. Financial Accounting Series (12 ed.). Cengage Learning.
  2. Accounting Research Bulletins No. 7 Reports of Committee on Terminology (Report). Committee on Accounting Procedure, American Institute of Accountants. November 1940. Retrieved 31 December 2013.
  3. Peggy Bishop Lane on Why Accounting Is the Language of Business; published by Knowledge @ Wharton High School
  4. "Department of Accounting". Foster School of Business. Foster School of Business. 2013. Retrieved 31 December 2013.
  5. "Accounting Software".
  6. Lung, Henry (2009). Fundamentals of Financial Accounting. Elsevier.
  7. DIWAN, Jaswith. ACCOUNTING CONCEPTS & THEORIES. LONDON: MORRE. pp. 001–002. id# 94452.
  8. IFRS Foundation, 2012. The move towards global standards Archived 2011-12-25 at the Wayback Machine. Retrieved on April 27, 2012.
  9. 9.0 9.1 Robson, Keith. 1992. “Accounting Numbers as ‘inscription’: Action at a Distance and the Development of Accounting.” Accounting, Organizations and Society 17 (7): 685–708.
  10. A History of ACCOUNTANCY; published by New York State Society of CPAs
  11. The History of Accounting; published by University of South Australia
  12. کشاورزی, کیخسرو (1980). تاریخ ایران از زمان باستان تا امروز (Translated from Russian by Grantovsky, E.A.) (in فارسی). pp. 39–40.
  13. Oldroyd, David & Dobie, Alisdair: Themes in the history of bookkeeping, The Routledge Companion to Accounting History, London, July 2008, Chapter 5, p. 96
  14. Oldroyd, David: The role of accounting in public expenditure and monetary policy in the first century AD Roman Empire, Accounting Historians Journal, Volume 22, Number 2, Birmingham, Alabama, December 1995, p.124, Olemiss.edu
  15. Parker, L. M., “Medieval Traders as International Change Agents: A Comparison with Twentieth Century International Accounting Firms,” The Accounting Historians Journal, 16(2) (1989): 107-118.
  16. MEDIEVAL TRADERS AS INTERNATIONAL CHANGE AGENTS: A COMMENT, Michael Scorgie, The Accounting Historians Journal, Vol. 21, No. 1 (June 1994), pp. 137-143
  17. Heeffer, Albrecht (November 2009). "On the curious historical coincidence of algebra and double-entry bookkeeping" (PDF). Foundations of the Formal Sciences. Ghent University. p. 11.
  18. Mariotti, Steve (2013-07-12). "So, Who Invented Double Entry Bookkeeping? Luca Pacioli or Benedikt Kotruljević?". Huffington Post. Retrieved 2018-08-03.
  19. Lauwers, Luc & Willekens, Marleen: "Five Hundred Years of Bookkeeping: A Portrait of Luca Pacioli" (Tijdschrift voor Economie en Management, Katholieke Universiteit Leuven, 1994, vol:XXXIX issue 3, p.302), KUleuven.be
  20. Timeline of the History of the Accountancy Profession; published by Institute of Chartered Accountants in England and Wales
  21. How the U.S. Accounting Profession Got Where It Is Today: Part I; author: Stephen A. Zeff; pages=189-205
  22. Perks, R. W. (1993). Accounting and Society. London: Chapman & Hall. p. 16. ISBN 978-0-412-47330-2.
  23. 23.0 23.1 "accounting noun - definition in the Business English Dictionary". Cambridge Dictionaries Online. Cambridge University Press. 2013. Retrieved 30 December 2013.
  24. 24.0 24.1 "accounting noun - definition in the British English Dictionary & Thesaurus". Cambridge Dictionaries Online. Cambridge University Press. 2013. Retrieved 30 December 2013.
  25. "accounting". Merriam-Webster. Merriam-Webster, Incorporated. 2013. Retrieved 30 December 2013.
  26. "accountancy". Merriam-Webster. Merriam-Webster, Incorporated. 2013. Retrieved 30 December 2013.
  27. "accountancy noun - definition in the Business English Dictionary". Cambridge Dictionaries Online. Cambridge University Press. 2013. Retrieved 30 December 2013.
  28. "accountancy noun - definition in the British English Dictionary & Thesaurus". Cambridge Dictionaries Online. Cambridge University Press. 2013. Retrieved 30 December 2013.
  29. "How to Become an Accountant or Auditor". U.S. Bureau of Labor Statistics. United States Department of Labor. 2012. Retrieved 31 December 2013.
  30. "150 Hour Requirement for Obtaining CPA Certification". AICPA. AICPA. 2013. Retrieved 31 December 2013.
  31. "Criteria for entry". CPA UK. CPA UK. 2013. Archived from the original on 19 August 2013. Retrieved 31 December 2013.
  32. 32.0 32.1 "Want a Career in Education? Here's What You Need to Know". AICPA. AICPA. 2013. Archived from the original on 1 January 2014. Retrieved 31 December 2013.
  33. "PhD Prep Track". BYU Accounting. BYU Accounting. 2013. Retrieved 31 December 2013.
  34. "Accountancy Qualifications at a Glance". ACCA. 2014. Retrieved 4 January 2014.
  35. Kyle, McHatton. "ICAS code of ethics". www.icas.com. Retrieved 2018-10-18.
  36. "ACA – The qualification of ICAEW Chartered Accountants". ICAEW. 2014. Archived from the original on 11 October 2013. Retrieved 4 January 2014.
  37. "European Accounting Qualifications Explained | CareersinAudit.com". CareersinAudit.com. Retrieved 2017-12-13.