Read the text №2: What is the use of Accounting

Meaning of Accounting

In 1941, the American Institute of Certified Public Accountants (AICPA) defined accounting as the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part, at least, of a financial character, and interpreting the results thereof.

With greater economic development, the meaning of the term accounting gradually became broader. In 1966 the American Accounting Association (AAA) defined Accounting as;

The process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information.

Further, in 1970 the Accounting Principles Board of AICPA stated that the function of accounting is;

To provide quantitative information, primarily financial in nature, about economic entities, that is intended to be useful in making economic decisions.

Further, Accounting is defined as:

The process of identifying, measuring, recording and communicating the economic events are considered in terms of economic and business transactions of the organization to interested users of the information.

Characteristics of the Accounting

The above definition contains four essential characteristics of the accounting:

1. Economic events

2. Identification, measurement, recording, and communication

3. Organization

4. Interested users of information

Economic Events

An economic event has been defined as a happening of consequence to a business entity. Economic events are classified into external and internal types. An external event, involves the transfer or exchange of something of value between two or more entities. It is called a transaction. The following are some examples of transactions:

• Sale of shoes by XYZ Company to customers.

• Payment of wages to employees by ABC Limited.

• Payment of monthly rent to the landlord.

• Purchase of raw materials by an enterprise from some other business enterprise.

• Purchase of ticket from an airline.

Read the text №3: What is financial management?

Financial management is the scientific manipulation and exploitation of our business and financial environment, using a range of statistical, mathematical, and economics tools, with the aim of making the best economic decision, under prevailing circumstances and availability of information and scarce resources.

Simply put, financial management is an intelligent quest for optimal use of financial and other economic resources at our disposal. Tax matters are also considered.

Everybody engage in financial mgt one way or the other on a daily basis without knowing it- at best, they will call it economizing. An average housewife will seek alternative ways of getting more value for the money she spends.

Financial mgt as a discipline sprung out from economics to become a stand alone profession. That is why we have people that call themselves financial manager and investment managers today.