Define: Accounting

UK Accounting Glossary

Definition: Accounting


Quick Summary of Accounting


The process of identifying, measuring and communicating financial information about an entity to permit informed judgements and decisions by users of the information.



What is the dictionary definition of Accounting?

Dictionary Definition


Accounting (ACCG) definition: A systematic way of recording and reporting financial transactions for a business or organisation.

  1. accounting A registry of pecuniary transactions; a written or printed statement of business dealings or debts and credits, and also of other things subjected to a reckoning or review
  2. banking A sum of money deposited at a bank and subject to withdrawal.
  3. A statement in general of reasons, causes, grounds, etc., explanatory of some event; a reason for an action to be done.

Also:

  1. accounting The development and use of a system for recording and analysing the financial transactions and financial status of a business or other organisation.
  2. A relaying of events; justification of actions.

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Full Definition of Accounting


Accounting is practice and body of knowledge primarily concerned with:

  • methods for recording transactions,
  • keeping financial records,
  • performing internal audits,
  • reporting and analysing financial information to the management
  • advising on taxation matters.

It is a systematic process of identifying, recording, measuring, classifying, verifying, summarising, interpreting and communicating financial information. It reveals profit or loss for a given period, and the value and nature of a firm’s assets, liabilities and owners’ equity.

Accounting provides information on the:

  • resources available to a firm,
  • the means employed to finance those resources, and
  • the results achieved through their use

Accounting is an information system which identifies, records, analyzes, interprets and communicates the economic data of a financial entity. Accounting consists of three basic activities – it identifies, records, and communicates the economic events of an organization to interested users. Let’s take a closer look at these three activities.

Identifying Economic Events:

Many events are happening each day in a business. Some of them are affecting the financial position of the business whereas, some don’t. Events affecting the financial position of a business i.e. Assets=Liability+ Owner’s Equity, are called Economic events and supposed to be recorded in the accounting system. To identify economic events; a company selects the economic events relevant to its business. Examples of economic events are the sale of snack chips PepsiCo, Providing of telephone services by AT & T, and payment of wages by Ford Motors Company. Examples of non-economic events of the same companies might be appointing a new manager by PepsiCo and departure of a trusted employee from AT & T.

Recording Economic Events:

Once a company like PepsiCo identifies economic events, it records those events in order to provide a history of its financial activities. Recording consists of keeping a systematic, chronological diary of events, measured in dollars and cents. Recording comes through a process called double-entry accounting system. The system consists of recording, summarizing, checking mathematical accuracy and preparing statement of financial position.

Communicating Consolidate Financial Data:

Finally, PepsiCo communicates the collected information to interested users by means of accounting reports. The most common of these reports are called Financial Statements. Parties interested into business’s financial information can be classified into three main categories. The interested parties are Internal, External and Government. To make the reported financial information meaningful, PepsiCo reports the recorded data in a standardized way. It accumulates information resulting from similar transactions. For example, PepsiCo accumulates all sales transactions over a certain period of time and reports the data as one amount in the company’s financial statements such data are said to be reported in the aggregate. By presenting the recorded data in the aggregate, the accounting process simplifies a multitude of transactions and makes a series of activities understandable and meaningful.

A vital element in communicating economic events is the accountant’s ability to analyze and interpret the reported information. Analyses involve use of ratios, percentages, graphs, and charts to highlight, significant financial trends and relationships. Interpretation involves explaining the uses, meaning and limitations of reported data.


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Examples of Accounting in a sentence


They send me an accounting every month.
He was unable to give a clear accounting for his actions.


Synonyms For Accounting


account, accountancy, accountant, accounts, bookkeeping


Cite Term


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https://payrollheaven.com/define/accounting/
Modern Language Association (MLA):
Accounting. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. February 28, 2020 https://payrollheaven.com/define/accounting/.
Chicago Manual of Style (CMS):
Accounting. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/accounting/ (accessed: February 28, 2020).
American Psychological Association (APA):
Accounting. PayrollHeaven.com. Retrieved February 28, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/accounting/

Definition Sources


Definitions for Accounting are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • BusinessDictionary.com
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 23rd December 2018.