Is the process of communicating financial information about a business entity to users such as shareholders and managers. The communication is generally in the form of financialstatements that show in money terms the economic resources under the control of management; the art lies in selecting the information that is relevant to the user and is reliable.The principles ofaccountancy are applied to business entities in three divisions of practical art, named accounting, bookkeeping, and auditing.
The American Institute of Certified Public Accountants (AICPA) definesaccountancy 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 interpretingthe results thereof."
Accounting is thousands of years old; the earliest accounting records, which date back more than 7,000 years, were found in Mesopotamia (Assyrians). The people of that timerelied on primitive accounting methods to record the growth of crops and herds. Accounting evolved, improving over the years and advancing as business advanced.
Early accounts served mainly to assistthe memory of the businessperson and the audience for the account was the proprietor or record keeper alone. Cruder forms of accounting were inadequate for the problems created by a business entityinvolving multiple investors, so double-entry bookkeeping first emerged in northern Italy in the 14th century, where trading ventures began to require more capital than a single individual was able toinvest. The development of joint stock companies created wider audiences for accounts, as investors without firsthand knowledge of their operations relied on accounts to provide the requisiteinformation. This development resulted in a split of accounting systems for internal (i.e. management accounting) and external (i.e. financial accounting) purposes, and subsequently also in accounting and...