1.1 Accounting and Accounting Profession

Accounting is an information system designed to identify, record, and reflect economic activities and events about an enterprise with monetary unit as its main criterion.

Identifying means to distinguish which activities are related to a firm’s objectives. Only those relevant economic activities need to be recorded, classified, and summarized by the accountant. Recording means to keep a systematic, chronological dairy of economic activities, and events measured in dollars. Reflecting means to provide timely and accurate information about a firm’s financial condition and operating performance to its external and internal users by means of financial reports. A vital element in reflection is the accountant’s ability to analyze and interpret reported information, and it involves the application of ratios, percentages, graphs, and charts to emphasize significant trends of economic activities and their relationships.

It is worth noting that accounting involves bookkeeping, while bookkeeping only involves the recording of economic activities as it is just one part of the whole accounting process. Accounting is also an information system which provides the required information to shareholders, creditors, and other stakeholders of the enterprise. The primary objective of accounting is to provide useful information to decision makers.