2576 Words6 Pages

Accounting is the compilation of financial information for use in making economic decisions.
BOOKKEEPING provides the basic accounting data, by systematically recording such day-to-day financial information as revenue from the sale of products or services; expenses of business operations such as the cost of merchandise sold; and overhead expenses such as rent, wages, and so forth. Accounting principles determine which financial events and transactions should be recorded in the bookkeeper's ledgers, journals, and computer printouts.
The analysis and interpretation of these records is the primary function of accounting. The various financial statements produced by accountants then furnish business and other types of organizations with the basis for their financial planning and control, and provide other interested parties (investors, the government) with information they can use to make decisions about these organizations.
FUNCTIONS OF ACCOUNTING Accounting provides informational access to a firm's financial condition for three broad interest groups. First, it gives the firm's management the information to evaluate financial performance over a previous period of time, and to make decisions regarding the future. Second, it informs the general public, and particularly the firm's stockholders or those interested in buying stock, about the financial status of the firm over the previous quarter or year. Third, accounting provides reports for the tax and regulatory departments of the various levels of government. Accountants also perform many of the same functions for agencies of the government, nonprofit organizations, and other entities. Financial
Accounting Large corporations maintain their own internal accounting departments; small firms may hire the services of an outside accountant. In either case, the accountant's principal duty is to gather the figures that relate to such financial matters as profits, losses, costs, tax liabilities, and other debts, and to present them to the firm's management in a form that is logical and readily understood. For publicly traded companies--those which offer stocks and bonds for sale to the public--accountants also prepare regularly published reports of interest to those outside the organization who are concerned with the company's financial condition: investors and potential investors, creditors, and the general public. At ...

... middle of paper ...

...own on the profession--especially on the
Big Six firms--a number of liability suits. The auditing industry is largely responsible for disciplining itself to ensure the independence of its auditors; and where an auditor differs from management as to the appropriate reporting principles, the auditor will require adherence to generally accepted accounting principles. The American Institute of
Certified Public Accountants (AICPA) has developed standards of performance for auditors designed to ensure both independence and that adequate audit work is performed. When financial statements are issued a "clean opinion" but later are found to be misleading, the independence of the auditor may be challenged. Although the auditor's task is not specifically to uncover fraud, courts have found auditors liable when their audit work was insufficient or lacked an adequate level of independence.
William J. Oliver Bibliography: Blensly, D.L., and Plank,
T.M., Accounting Desk Book, 9th ed. (1989); Briloff,
A.J., Unaccountable Accounting (1972); Meigs, W.B. and
R.F., Accounting: The Basis for Business Decisions, 8th ed. (1989); Weinstein, G.W., The Bottom Line: Inside
Accounting Today (1989).

More about Accounting

Open Document