Accounting is a discipline that seeks to
provide information about a business organization. Such information is useful to those who
are interested in making decisions that may affect the organization or one's relationship
with it.
Accounting activities can be broken down into two important types.
First, financial accounting which concerns the whole area of the capture of financial data
of a company's transactions. These are reported both within the company and to
shareholders, regulators and others outside it. Secondly, managerial accounting, a
management tool which includes costing and budgeting.
Accounting as an activity is many centuries
old, but the growth of industrial activity in the late nineteenth and early twentieth
centuries gave it new prominence as a discipline. Both financial accounting and managerial
accounting have now become important managerial decision-making tools. Virtually all large
companies, as well as many 'middle market' companies, have accounting expertise available
internally. Of greater significance, however, is the use of such expertise within the
organization to assist in the management of the business. In many companies, the focus of
accounting has moved from these activities needed to meet regulatory reporting
requirements to those that are increasingly significant in the management of the company.
The accounting process in many companies has evolved into a total information system, with
the system supplying data that is not limited to information which is a product of the
double-entry accounting system.
In the 1990s there has been a growing awareness that financial
reports have lost some of their usefulness for decision -making purposes, and that for
many companies historical cost information now has little relevance. There is a growing
recognition that quantified information in financial statements tells only part of the
story. Accounting is being increasingly required to adapt to the new needs of business.
Today there is considerable diversity in accounting practices around
the world and the rapid change and growth of the world economy means that accounting in
turn is undergoing considerable change. Advances in technology, cross-border trade and
geo-political initiatives such as European integration are all having an impact. It is
probable that in the near future there will be moves towards the widespread adoption of
international accounting standards.
Arthur R. Wyatt