Definition of Accounting

Accounting is defined as the art of classifying, recording and summarising of transactions and business events in monetary terms and interpreting the results to interested parties to enable them to make decision.

The objectives of financial statement is to know the financial status of the organization, whether the business is making profit or running at loss, and what corrective action to be taken.

Accounting is important to the business because it assist management in carrying out its functions of planning controlling and decision making by using accounting techniques such as marginal costing budgetary controls and standard costing   

The purpose of recording and analysing an accounting information of a business are as follows:

1. The user need to know the financial position of the business. They want to know how business is doing, whether the business is making profits or loss out of its business activities. If the business is making profits, decisions such as expansion, profits sharing, or savings can be made. It the business is running at loss, mitigating actions should be made in order to recover from loss or minimising the loss.
2. Accounting information can act as an evidence to any business transaction in justifying any financial actions. For example, to collect debts owe by the customer, the business need to provide aging statement or, list of invoices.