Nature of Accounting

NATURE OFACCOUNTING
The various definitions and explanations of accounting has been propounded by different
accounting experts from time to time and the following aspects comprise the nature of accounting
:
i) Accounting as a serviceactivity
Accounting is a service activity. Its function is to provide quantitative information,
primarily financial in nature, about economic entities that is intended to be useful in making
economic decisions, in making reasoned choices among alternative courses of action. It means
that accounting collects financial information for the various users for taking decisions and
tackling business issues. Accounting in itself cannot create wealth though, if it produces
information which is useful to others, it may assist in wealth creation and maintenance.
(ii) Accounting as aprofession

Accounting is very much a profession. A profession is a career that involve the
acquiring of a specialised formal education before rendering any service. Accounting is a
systematized body of knowledge developed with the development of trade and business over the
past century. The accounting education is being imparted to the examinees by national and
international recognised the bodies like The Institute of Chartered Accountants of India (ICAI),
New Delhi in India and American Institute of Certified Public Accountants (AICPA) in USAetc.
The candidate must pass a vigorous examination in Accounting
Theory,AccountingPractice,AuditingandBusinessLaw.Themembersoftheprofessional bodies
usually have their own associations or organisations, where in they are required to be
enrolled compulsorily as Associate member of the Institute of Chartered Accountants
(A.C.A.) and fellow of the Institute of Chartered Accountants (F.C.A.). In a way,
accountancy as a profession has attained the stature comparable with that of lawyer,
medicine orarchitecture.
(iii) Accounting as a socialforce

In early days, accounting was only to serve the interest of the owners. Under the changing
business environment the discipline of accounting and the accountant both have to watch and
protect the interests of other people who are directly or indirectly linked with the operation of
modern business. The society is composed of people as customer, shareholders, creditors and
investors. The accounting information/data is to be used to solve the problems of the public at
large such as determination and controlling of prices. Therefore, safeguarding of public interest
can better be facilitated with the help of proper, adequate and reliable accounting information and
as a result of it the society at large is benefited.
(iv) Accounting as alanguage

Accounting is rightly referred the "language of business". It is one means of reporting and
communicating information about a business. As one has to learn a new language to converse
and communicate, so also accounting is to be learned and practised to communicate business
events.ne of accounting.
(v) Accounting as science orart

Science is a systematised body of knowledge. It establishes a relationship of cause
and effect in the various related phenomenon. It is alsobased on some fundamental
principles. Accounting has its own principlese.g. the double entry system, which explains
that every transaction has two fold aspect i.e. debit and credit. It also lays down rules of
journalising. So we can say that accounting is ascience.
Art requires a perfect knowledge, interest and experience to do a work efficiently. Art also
teaches us how to do a work in the best possible way by making the best use of the available
resources. Accounting is an art as it also requires knowledge, interest and experience to maintain
the books of accounts in a systematic manner. Everybody cannot become a good accountant. It
can be concluded from the above discussion that accounting is an art as well as a science.
(vi) Accounting as an information system

Accounting discipline will be the most useful one in the acquisition of all the
business knowledge in the near future. You will realise that people will
beconstantlyexposedtoaccountinginformationintheireverydaylife.Accounting information
serves both profit-seeking business and non-profit organisations.The accounting system of
a profit-seeking organisation is an information systemdesigned to provide relevant
financial information on the resources of a business and the effect of their use.
Information is relevant and valuable if the decision makers can use it to evaluate the
financial consequences of variousalternatives.
Accounting generally does not generate the basic information (raw financial data), rather the raw
financial data result from the day to day transactions of the business.
As an information system, accounting links an information source or
transmitter (generally the accountant), a channel of communication (generally the
financial statements) and a set of receivers (externalusers).
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NATURE OFACCOUNTING

(ii) Accounting as aprofession

(iii) Accounting as a socialforce

(iv) Accounting as alanguage

(v) Accounting as science orart

(vi) Accounting as an information system

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