12/6/2023 0 Comments Accounting definition![]() Specialist institutes of management accountants, such as the IMA and the Chartered Institute of Management Accountants (CIMA), have focused on defining management accounting. This definition also focusses attention on the use and reporting of non-financial information primarily for “businesses and corporations”. Today, the definition of accounting on Wikipedia is “the measurement, processing, and communication of financial and non-financial information about economic entities such as businesses and corporations”. 9).Īnother longstanding definition of accounting by the American Accounting Association (1966) is premised on the notion of “decision-usefulness” of the accounting process: “Accounting is the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of information”. Underpinning most of key definitions of accounting is that delivered long ago by the American Institute of Accountants (now the American Institute of Certified Public Accountants): defining accounting 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 a financial character, and interpreting the results thereof” (American Institute of Accountants, 1953, p. Like the Institute of Management Accountants, we suggest that the behaviours of professional accountants and their evaluation should be based on the definition of accounting. We did not set out to define the “practice of accounting”, such as in terms of what professional accountants actually do, an endeavour that has been pursued by others. We proposed discussion and debate in order to develop a meaningful and suitable definition of accounting for the 21 st century and suggested a working definition to start the process. We found that they do not reflect the essential nature of accounting. Our objective was to evaluate existing definitions and consider their appropriateness. We searched for common definitions of accounting developed by accounting educators and professional accountancy organisations (Carnegie et al, 2020). Accounting students of today and the future professional accountants, are educated in the fundamental facets of accounting as a professional discipline with strong reliance on suitable meaningful definitions, that are appropriate and current. ![]() The absence of meaningful, accurate and accepted definitions would have unfavourable implications for the effective application of accounting, auditing, ethical and accounting education pronouncements globally. The application of authoritative pronouncements of the independent standard setting boards related to the accountancy profession (IASB, IAASB, IPSASB and IESBA) for instance, depends fundamentally on the definitions provided for the common and clear use of words or terms in accounting, such as the definition of assets, liabilities, income, expenses, substance over form, professional judgement, scepticism and post-balance-date events. ![]() A definition is a formal statement expressing the essential nature of something, as are the definitions of accounting, auditing and financial reporting. It conveys the fundamental meaning or state of something. Why is a definition necessary?Ī good definition is concise, coherent and complete. ![]() ![]() We argue this is crucial to the future of our profession. We are following other calls to define the accountant of tomorrow and propose that accounting can play a major role in answering the planet’s “big questions” and solving its “wicked problems”. In a recent article we review current definitions of accounting and propose a dialogue to develop a definition that is representative of accounting today and fit for purpose. How we define accounting today and what defines accounting tomorrow are fundamental to the purpose, value and identity of the accountancy profession. ![]()
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