Accounting: Definition, History, Purpose, Functions, Benefits and Types of Fields

Accounting: Definition, History, Purpose, Functions, Benefits and Types of Fields – What is meant by the term Accounting? On this occasion About the knowledge.co.id will discuss about Accounting and the things that surround it. Let's look at the discussion together in the article below to better understand it.

Accounting: Definition, History, Purpose, Functions, Benefits and Types of Fields

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Accounting is the art of recording, summarizing, analyzing and reporting data relating to financial transactions in a business or company. For practitioners in this field are called accountants.

In language based on Wikipedia, the notion of accounting is a form of interpretation of company finances to measure and describe certainty regarding information relating to the entry and exit of money company.

Accounting itself has also been called the "language of business" to measure the results of economic activity in organizations and convey this information to various parties, including investors, creditors, management, and regulators.

Accounting is "the process of identifying, measuring, recording, and reporting information financial economics that serves as an assessment as well as decision making for the party that need it”.

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Understanding of Accounting According to Experts

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  Charles T. Horngren and Walter T. Harrison

According to Charles T. Horngren and Walter T. Harrison, the notion of accounting is an information system that measures business activity, processes data into a report, and communicates the results to decision makers.

• Littleton

According to Littleton, the notion of accounting is an activity that aims to carry out periodic calculations between costs (effort) and results (achievement). This definition is the essence of accounting theory and is a measure used as a reference in studying accounting.

•  Warren et al

According to Warren et al, the notion of accounting is an information system that produces reports to interested parties regarding economic activity and company conditions.

• Rudianto

According to Rudianto, accounting is an information system that produces reports to interested parties regarding economic activity and the condition of a business entity.

• C. West Churman

According to C. West Churman, the notion of accounting is written experience that is useful for making decisions and experiences that are structured are valuable for making choices.

• Suparwoto L

According to Suparwoto L, the notion of accounting is a system for measuring and managing financial transactions and provide management results in the form of information to internal and external parties of the company.

These external parties consist of investors, government creditors, labor unions, and others.

• Arnold

According to Arnold, accounting is a system for providing information (especially financial) to anyone who has to make decisions and control the implementation of these decisions.

• Understanding Accounting According to AAA

According to the American Accounting Association (AAA), the notion of accounting is an identification and measurement system to provide economic information reports and their assessments. The purpose of accounting as explained by Littleton is to perform periodic calculations on the effort or cost of the results achieved.

• Understanding Accounting According to ABP

According to the Accounting Principles Board (APB) Statement no. 4 in Smith Skousen, accounting is a service activity which is to provide quantitative information, especially those that are has the nature of making economic decisions in making decisions about logical choices among various actions alternative.

• Definition of Accounting According to AICPA

According to the American Institute of Certified Public Accounting (AICPA), the definition of accounting is the art of recording, classifying, and summarizing in certain ways in monetary terms, transactions and events which are generally of a financial nature, including interpreting the results.

So, the notion of accounting in a nutshell is a system in business that discusses finance and how money is entered and used. So, accounting is very important in business as profit and loss analysis.

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History of Accounting

Experts argue that accounting has existed since ancient times, namely when humans made transactions using money as legal tender. In 1494 appeared a book entitled "Summa de Aritmatica, Geometrica Proportioni et Propotionalita" by Lucas Pacioli. The contents of the book include a chapter entitled "Tractatus de Computies et Scriptoris" which teaches a double bookkeeping system or often called the continental system.

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Accounting Purpose

The general purpose of accounting is to collect and report information regarding the finances, performance, financial position and cash flow of a business. This information will later be used as a basis for making economic decisions.

So the explanation, there are several accounting objectives, including the following:

• General Purpose
• • Provide financial information, both assets and liabilities of the company
  • Provides information about changes in the company's various (net) economic resources
  • Provide company financial information that can assist in making estimates of the company's profit potential
  • Provide information about changes in the company's various economic resources, be it assets, debt, and capital.
  • Provide other information related to financial reports to assist users of these reports
• Specific Objectives Specifically, the purpose of accounting is to provide information in the form of reports that contain financial position, results business, and other changes in financial position fairly in accordance with Generally Accepted Accounting Principles (PABU). (GAAP).
• Objectives Qualitatively:
  • Provide relevant information
  • Delivering information that has been tested for truth and validity
  • The information conveyed can be understood by interested parties
  • Delivering financial reports for the benefit of all parties related to company activities
  • Provide real time transaction information, or as soon as possible.
  • The information submitted is in accordance with Generally Accepted Accounting Principles (PABU) and is comparable
  • Submission of financial statements must be complete and comply with financial report disclosure standards

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Accounting Function

Accounting is definitely needed in business because of its several functions as follows:

• Recording Reports

Recording reports or recording transaction records systematically and chronologically is the main function of accounting. These transaction records are then sent to the Account Ledger to finally prepare the final account to find out the profit and loss of the business at the end of the accounting period.

• Protecting Property and Assets

The next accounting function is to calculate the actual amount of Asset Depreciation by using the proper method and applicable to certain assets.

Any unauthorized dissipation of assets will result in a business going bankrupt. That is why accounting systems are designed to protect business property and assets from unauthorized use.

• Communicating Results

The next function of accounting is to communicate recorded results and transactions to all parties interested in a particular business. For example investors, creditors, employees, government offices, researchers, and other agencies.

• Legal meeting

The accounting function is also related to system design and development. For example systems to ensure the recording and reporting of results always meet legal requirements. This system is later needed to activate ownership or authority to file various statements, such as Sales-Tax Returns, Income-Tax Returns, and others etc.

• classify

Furthermore, the accounting function that is no less important is as a classification related to the systematic analysis of all recorded data. With this classification, it will be easier to group the types of transactions or entries. This classification activity is carried out on a book referred to as the "Ledger".

• Create Summary

This summarizing activity involves presenting confidential data in a way that is understandable and useful to internal and external end users of the accounting reports.

This activity leads to the preparation of the report:

• • Trial balance
  • Income statement
  • balance sheet

• Analyze and Interpret

The last accounting function is to analyze and interpret financial data. Financial data that has gone through an analysis process is then interpreted in a way that is easy to understand so as to assist in making judgments regarding the financial condition and operational profitability business.

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Benefits of Accounting in Business

Some of the benefits of accounting include:

• Provide financial information as a basis for making managerial decisions
• Providing information/reports to external parties
• As a means of control and financial controllers
• As a company evaluation tool
• Be the basis for allocating resources

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Types of Accounting Fields in Business

After knowing the meaning of accounting in business, there are several areas of accounting in business that are important to know. Here are some areas of accounting:

• Financial Accounting

The field of accounting which concerns the recording of company financial transactions on a regular basis as a useful source of information for management, company owners and creditors. Generally, almost all businesses implement financial accounting as a form of reporting on company funds.

• Auditing or Accounting Examination

The field of accounting that concerns the examination of financial reports to determine the honesty and truthfulness of these reports. In a growing business usually do not apply this field. Auditing is very important to find out corruption in the company.

• Tax accounting

The field of accounting that concerns the tax reporting of corporate finance. Tax accounting is important as a consideration related to the consequences of corporate transactions.

• Budgetary Accounting

As the name suggests, this accounting is used to make a company budget regarding plans to use money in a certain period.

• Cost accounting

This accounting is used to control the company's budget or budget. The point is to reduce the use of company funds even though it has been budgeted for.

• Accounting for Non-Profit Organizations

Not all businesses apply this field of accounting because the aim is to plan a budget not to make a profit. For example, as in a company's CSR funds, this includes the results of accounting for non-profit organizations.

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