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INTRODUCTION TO ACCOUNTING
Learning Objectives:
After studying this chapter, the students should be able to:
1. state the meaning and need of accounting;
2. discuss accounting as a source of information;
3. explain the objectives of accounting; and
4. describe the role of accounting.
Over the centuries, accounting has remained confined to the financial record-keeping
functions of the accountant. But, today’s rapidly changing business environment has
forced the accountants to reassess their roles and functions both within the
organization and the society.
The role of an accountant has now shifted from that of a mere recorder of transactions
to that of the member providing relevant information to the decision-making team.
Broadly speaking, accounting today is much more than just bookkeeping and the
preparation of financial reports. Accountants are now capable of working in exciting
new growth areas such as: forensic accounting (solving crimes such as computer hacking
and the theft of large amounts of money on the internet); ecommerce (designing web-
based payment system); financial planning, environmental accounting, etc.
This realization came due to the fact that accounting is capable of providing the kind of
information that managers and other interested persons need in order to make better
decisions. This aspect of accounting gradually assumed so much importance that it has
now been raised to the level of an information system. As an information system, it
collects data and communicates economic information about the organization to a wide
variety of users whose decisions and actions are related to its performance.
The American Institute of Certified Public Accountants (AICPA) defines accounting as:
You may not notice but the simple things you do and encounter everyday can actually
be related to some level of accounting. You make budgets, count change and check the
receipts from the supermarket. You may also have listed things you spent your money
with at one point in your life.
We are surrounded by business – from managing our own money to seeing profit
statements of big corporations. And where there is business, there sure is accounting.
HISTORY OF ACCOUNTING
The history of accounting or accountancy is thousands of years old and can be traced to
ancient civilizations. The early development of accounting dates back to ancient
Mesopotamia, and is closely related to developments in writing, counting and money
and early auditing systems by the ancient Egyptians and Babylonians. By the time of the
Emperor Augustus, the Roman government had access to detailed financial information.
The use of Bulla (plural Bullae) for record keeping found in Mesopotamia was
considered by experts as the beginning of the art of writing. The original bulla was a
lump of clay molded around a cord and stamped with a seal. Once the clay has dried,
the container (such as a vase or money bag) cannot be violated without visible damage
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to the bulla, thereby ensuring the contents remain tamper-proof until they reach their
destination.
Roman historian Suetonius and Cassius Dio recorded that in 23BC, Augustus prepared a
rationarium (account) which listed public revenues, the amounts of cash in the aerarium
(treasury), in the provincial fisci (tax officials), and in the hands of the publican (public
contractors); and that it included the names of the freedmen and slaves from whom a
detailed account could be obtained
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