What is Accounting?

Accounting, also known as accountancy, is described by the American Institute of Certified Public Accountants (AICPA) 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 financial character, and interpreting the results thereof.” An accountant is thus one who works in the field of accounting, which can include several other categories, such as bookkeeping (keeping a record of transactions), and auditing (an evaluation of the accounting practices of a company or person), fall under the umbrella of accounting.


Accounting is not new. Evidence of accounting records extend back over 7,000 years with the ancient Assyrians, who kept primitive accounting records of crops and herds. Over the course of time, accounting slowly evolved, becoming more detailed and serving a wider variety of purposes, such as double-entry bookkeeping, the development of joint stock companies, and a split in accounting practices (management vs. financial).

Today, accounting is the primary tool and known as the “language of business,” as it is primary vehicle through which financial information is delivered to investors, The theory of accounting is based on the simple equation of assets = liabilities + equities. In the world of financial accounting, a “liability” is defined as an “obligation arising from past events.” These can include taxes, wages, bonds, leases, pensions, and more. Equity is defined as the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid.” Stock is a prime example of this.

The word “accountant” is derived from the French word compter, itself derived from the Latin computare. The word was originally spelled as “accomptant,” though as with many words, the word evolved into its current form.

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Posted on May 18, 2012 at 9:00 AM