Define Accounting

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The first thing one should do, no matter what subject one is studying, is to define the subject itself.

In other words... What's it about? What's the deal? What is this thing?

Okay, so let's define accounting:

Accounting is a system of recording information about a business.

An old cash register

A vintage cash register

The information that is collected is primarily numerical.

This information is then presented to various people to help them make decisions.

The accounting system is used to maintain records for all businesses, whether a multinational corporation or a small business.

To account for something means to keep a record of something in your business by using the accounting system.

An accountant (or bookkeeper) collects documentation and records this information, categorizes it (i.e. organizes the different bits of information under certain categories), and presents it in specific formats.

Accounting information is finally presented in the form of financial statements – the key reports of a business.

Bookkeepers are usually involved more in data collection and entry.

Accountants can fulfill this role too, but more often these days are involved in preparing and presenting financial statements, and fulfilling an advisory or consulting role. Accountants have even become business strategists, intimately involved in guiding the operations of a business.

Okay, so now that you can define accounting and related terms, it's time to learn about the famous, or infamous basic accounting equation, the single most important equation in accounting, the foundation on which everything else rests.

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Questions Relating to This Lesson

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Q: What is the main important difference between accountants and bookkeepers? A: Both accountants and bookkeepers collect and record accounting information, …

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