Accounting is much more than just book keeping of financial records. It has been realised that accounting is capable of providing much more information so that takers of that information can take efficient information.

AAA stands for American Accounting Association defined accounting as the process of identifying, measuring and communicating economic information to permit informed judgement and decisions by users of the information.

Links in Accounting
Decision Makers - Economic Information - Consequence of the results of their decision.

Accounting Principles Board of AICPA also emphasized that the function of accounting is to provide quantitative information relaated to financial matters and economic entities intended to be useful in making economic decisions.

With the purpose to appreciate the exact nature of accounting, we must understand following aspects of definition :

1. Economic Events
2. Identification, Measurement, Recording, Communication
4. Interested Users of Information.

Accounting traces its history to Babylonia and Egypt. Egyptians used some form of accounting for their treasuries where gold and other valuables were kept.There was a treasury who maintained record of the treasure and did send day to day report to the Wazir(or the hierarchy) who in turn sent the monthly report to the King.

Advent of Accounting in India :
Chanakya wrote a book named Arthshastra.

Origin of Words Debit and Credit :
Debit comes from the Italian word Debito means owed to the proprietor.
Credit comes from the Italian word credito which means owed by the proprietor.

Economic Events : Business organization is associated with economic events.

Economic events are described as happening of consequence to a business organization which involves transactions and which can be mwasured using monetary terms.

Accounting involves buch of transactions related to economic events.

External Events : Transactions happening between an outsider and an organization.

Internal Events : Events that take place between internal components of the organisation. e.g Salary given to employers, supply of raw material to store department to the manufacturing department

Identification : It means to understand what transaction one needs to record. It includes observing activities and selecting those events that are considered to have financial essence and relate to the organisation.

Measurement : Quantification of Business transactions into financial terms by using monetary units like Rupees or paise or any other unit.

If an event cannot be quantified in monetary terms then it is not considered for recording in financial accounts.

Recording : When economic events are identified and measured then it is recorded in the books of account in the chronological order

This recorded information is made available when required.

Communication : Economic events are identified, measured, recordedin order that the pertinent infomation is genrated and communicated in a certain form to management and other intenal and external users when required.

Communication of this information takes place through accounting reports. These reports are quaterly, monthly, weekly or daily.

Accounting inforamtion system must be designed in such a manner that right information can be retrieved at the right time.

Organisation refers to business enterprise
Based upon size of activity and level of business operation it can be classified as :
1. Sole Proprietory
2. Partnership
3. Cooperative Society
4. Local Authority
5. Municipal Cooperation

What is accounting?
Accounting is a means by which necessay financial informaiton about business enterprise is communicated.

Accounting is language of business.

Many people need finanical informations to make decisions.

There are two types of users :
1. Internal Users
2. External Users