The Nature of Accounting and conventions are not discovered but

they are contrived and mutuallyagreed

According in its essence is a function that
upon.(
aims to accumulate the communicate
informationessential to the understanding iv
of the activities of an entity. It is an
)
obstraction of the real worldeconomic
events. The distinctive nature that makes Accounting as a means to an end:
accounting a unique system is as follows :(
Although accounting system is
i characterized by a hostof rules, procedures
and conventions, they are not the end by
)
themselves. The ultimate end ofaccounting
Accounting as a process: is to provide external information-
communication system by gathering,
Accounting is a process which involves
compacting,interpreting and disseminating
gathering, compacting,interpreting and
economic data which gives a financial
disseminating economic information in a
representation of therelative economic
systematic way.(
rights and interests of the economy
ii segments, in order to facilitate
judgmentformulation and action taking by
)
its users.(
Stewardship function :
v
Accounting is a stewardship function. Its
)
basic goal is to report onthe resources and
obligation of the entity to the owners. Accounting as an art:
Through the medium of financialstatements
Accounting is more of an art than a science;
it communicates to the interested parties of
its logical foundation isnot deeply
the contributions and relative rights ofthe
embedded in scientific or natural law. It is
economy segments the
essentially and fundamentally utilitarian
shareholders/owners, creditors and others.(
innature, therefore, its methodologies are
iii primarily based on expediency and upon
actual day today needs of the business
)
community.functions of accounting are as
Concepts and conventions: follows:(

Since accounting is a process that aims at i

communicatingeconomic information, it
)
must rely on a set of previously agreed
concepts, conventions andrules. These rules Recording function:
According is essentially a recordkeeping
function of the past, presentand future
economic events of the business. The
recording function involves techniques
ofinformation gathering and processing.(
ii
) Income determination:
Summarizing function:
The next important function of accounting
is summarizing diverseeconomic data into
homogeneous group or unit called account.
It is most important function ofaccounting
since just like our language system;
accounting communicates economic
informationto its users through these
accounts.(
iii
)
Accounting as a medium of communication
between the firm and the external parties:
Accounting is not an end in itself, but it
exists to serve a purpose. The purpose is to
the economic resources, obligations and
owner.sequities of the business at periodic
interval of
time.. Despite difference of opinions about
theexact nature of balance sheet,
accountants have found its preparation
extremely useful.(
vi
)
Control function:
Accounting is a special type of calculative
service that comes handy tothe
supplyreliable and dependable information
about the economic chronicles of the
business for thepurpose of decision making
by the interested parties.(
iv
)
.Net income determination under the
historical cost method lies atthe heart of
the whole accounting methodology, says
Campfield Income is the basic measurethat
provides information about the periodic
progress of business. It also provides the
basicrationale for being in business.(
v
)
Preparation of balance sheet :
Balance sheet is very often stated as a
statement offinancial condition that
purports to show
management for the purpose of exercising
control over many functional areas of
business.(
vii
)
Compliance with legal requirements:
In modern days accounting is not merely an
act ofprudence to exercise control, but its
necessity arises from the need of
compliance with manylegal requirements.
For example, the provisions of the Indian
Companies Act makes it obligatory
Acommon question is whether there is any
difference
between accounting and bookkeeping. We will
begin with bookkeeping, since it is essentially a
subset of the larger topic of accounting.
Bookkeeping is the recordation of
basic accounting transactions, such as:
 Issuing invoices to customers
 Recording invoices from suppliers
 Recording cash receipts from
customers
 Paying suppliers
 Recording changes in inventory
 Processing payroll
 Processing petty cash transactions
These transactions are mechanical in
nature; that is, the bookkeeper follows a
prescribed set of procedures on a repetitive
basis to record a common activity. These
common bookkeeping tasks are entirely
adequate for the accounting needs of a
small business.
A bookkeeper could compile financial
statements from the transactions just
described. However, those financial
statements would be incorrect to some
extent, because they would not include the
following additional actions that are usually
handled by an accountant:
 Accruing or deferring expenses
 Accruing or deferring revenue
The broader field of accounting includes the
use of these accruals. In addition,
accounting encompasses the following
activities:
 Creating the chart of accounts
 Setting up the general ledger
 Designing the financial statements
 Issuing customized management
reports to address specific issues
 Altering the classification or
recordation of transactions to meet
certain accounting standards
 Creating a budget and comparing it
to actual results
 Compiling tax returns from the
financial information
 Creating a set of controls within
which the financial system operates
 Designing a record keeping,
archiving, and document destruction
system
Usually, there is at least one trained
accountant responsible for the accounting
operations of a medium to large-sized
business, and who sets up the procedures
that are then followed by a larger number
of bookkeepers.
In short, the difference between accounting
and bookkeeping is that bookkeeping
focuses on repetitive business transactions,
and so is a subset of the much larger set of
tasks that can be encompassed by
accounting.
There are also significant differences
between the bookkeeper and accountant
positions. The bookkeeper role is broad-
based, with one person typically handling all
of the accounting transactions for a small
business. The bookkeeper tends to be very
experienced, but is more likely to be lacking
in formal accounting training. A bookkeeper
with a great deal of responsibility may be
referred to as a full-charge bookkeeper.
Conversely, the accountant is more likely to
work exclusively on a specific area, such
as fixed assets or the general ledger, and is
more likely to have formal training in the
accounting function. There is also a career
path for accountants, which leads to the
assistant controller and controller positions.
Businesses both large and small, public and
private, for profit and nonprofit, are driven
by numbers. Whether it’s tracking sales,
managing inventory or making payroll,
smart managers know that keeping tabs on
those numbers is crucial, but without a solid
accounting function, that task can become
an organizational nightmare. Organizations
seeking a well-rounded accounting function
need to consider several aspects of
accounting beyond just simple debits and
credits.
What is the Purpose of an Accounting
Function?
The primary purpose of any accounting
function is that of ongoing financial record
keeping. Monetary information of all types-
-operational expenses, salaries, donations,
capital expenditures, investments, cash
flow, utilities--should be tracked on a
monthly basis at a minimum. The ongoing
result is the creation of an organization’s
financial history that can be used in a
variety of ways, as it gives managers a
snapshot of the firm’s financial health and
wealth at any given time.
The Two Main Forms of Accounting
But the collected data are only meaningful
if used; to use data properly, managers
break the accounting function down into
two primary forms--managerial accounting
and financial accounting. While both rely on
the same underlying financial data stream,
their main difference lies in their focus and
time orientation. With managerial
accounting, the focus is internal and looking
forward, but financial accounting, the focus
is external and looking back.
Managerial Accounting
Managerial accounting is used internally for
planning and for moving an organization
forward in a financially sound manner. With
this function, accountants look at the
historical financial data stream as well as
the current economy and make
assumptions about trends and what these
trends mean for the organization’s future.
Managerial accountants look at the
organization in segments, either by
department, by region or by product lines
for instance, and estimates are made about
sales expectations, performance, pricing,
costs and work force needs. With
managerial accounting, smart managers try
to predict an organization’s financial future
and make sound decisions based upon
those expectations.
Financial Accounting
With financial accounting, the emphasis is
on looking at past data with the objective of
determining an organization’s value as a
whole. Shareholders and investors will use
the information to decide if a public
company is undervalued and worth
investing in or overvalued and should be
avoided. Creditors will use this same
information to decide whether a nonprofit
organization is a good risk before lending
money. Governmental agencies will use this
same information to levy taxes on for-profit
organizations. Most importantly, though,
financial accounting is required and, as it’s
shared externally, it must be precise, thus
financial accounting must conform with
generally accepted accounting principles to
avoid legal issues. Managerial accounting
however, since it is used internally, need
not be quite so precise, nor is it mandatory.
Thus, while organizations must report
financially accurate information to the
public, they remain free to do as they wish
for internal planning purposes.
during the period of the Mauryan Empire.
His book "Arthashasthra" contains few
detailed aspects of maintaining books of
accounts for a Sovereign State.
The Italian Luca Pacioli, recognized as The
Father of accounting and bookkeeping was
the first person to publish a work
on double-entry bookkeeping, and
introduced the field in Italy.[7][8]
The modern profession of the chartered
accountant originated in Scotland in the
nineteenth century. Accountants often
belonged to the same associations as
solicitors, who often offered accounting
services to their clients. Early modern
accounting had similarities to
today's forensic accounting. Accounting
began to transition into an organized
profession in the nineteenth century,[9] with
local professional bodies in England
merging to form the Institute of Chartered
Accountants in England and Wales in 1880.

The history of accounting or accountancy is

thousands of years old and can be traced
to ancient civilizations.[1][2][3]

The early development of accounting dates

back to ancient Mesopotamia, and is closely
related to developments
in writing, counting and money[1][4][5] and
early auditing systems by the
ancient Egyptians and Babylonians.[2] By the
time of the Roman Empire,
the government had access to detailed
financial information.[6]
In India Chanakya wrote a manuscript
similar to a financial management book,