Accounting 101, Lesson #1: What is Accounting?

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There’s a common perception that accounting is a difficult subject. Students often shy away from accounting. Perhaps a myth.

Well, ours is a golden age for demythologization.

Moreover I would like to see that myth destroyed.

Believe it or not we are all involved in some form of accounting on an almost daily basis. Even those simple acts – such as paying your tuition fees, sending a text message, paying for the bus fare or listening to a lecture (yes) involve some form of accounting. Whether formal or informal.

Let’s say you buy a soda worth one dollar from a street vendor. The accounting equation in your point of view is a debit, for value received (soda) and a credit for value given up (one dollar)

But that’s getting to far ahead of the story, almost the end product of the accounting process. Hence the end product is the beginning equation and lies far ahead.

You’ll see what I’m talking about. For now we’ll build you a strong foundation of basic accounting concepts and principles.

Accounting, the Language of Business

Most of the time accounting is associated with organized business but the fact is it enters almost all aspects of everyone’s daily life. That is why everyone needs some degree of understanding the accounting concepts and process.

Accounting is a systematic recognition, measurement, reporting and interpretation of data that are related to financial activities of a natural or artificial person.

It is often referred to as the language of business mainly because it is a communication tool that helps data-users in making certain financial decisions.

The Association of certified public accountants (AICPA) defines 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 financial character, and interpreting the results thereof.”

Well, that’s all for now. The second issue will be much more interesting as it will talk about the responsibilities of an accountant.

Until then.

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