The Accountant in Business

What is Accounting?

Accounting is the process of recording, classifying, summarising, interpreting and communicating the financial transactions of an organisation.

Its purpose is to provide a true and fair view of the financial position and performance of an entity to its users (stakeholders).

Users of financial information include: investors, employees, creditors, suppliers, managers, government and the general public.

The Accounting Process

1. Identify — monetary transactions are identified from source documents
2. Record — transactions are entered in day books (journals)
3. Classify — transactions of similar nature are grouped together in ledger accounts
4. Summarise — a trial balance is extracted; financial statements are prepared
5. Interpret and communicate — results are analysed and reported to stakeholders

The financial statements produced show the wealth, profit and financial position of the entity for a particular financial year.