![]() ![]() In the nineteenth century, companies came up in many areas of infrastructure like the railways, steel, communication, etc. With the passage of time, the corporate world grew. The increase in competition and mass production of goods led to the rise of accounting as a formal branch of study. ![]() ![]() The onset of the industrial revolution necessitated the development of more sophisticated accounting system, rather than pricing the goods based on guesses about the costs. He was a mathematician and a friend of Leonardo Ileda Vinci. The first known description of double entry book keeping was first published in 1994 by Lucas Pacioli. Accounting was used to keep records regarding the cost of labour and materials used in building great structures like the Pyramids.ĭuring 1400s, accounting grew further because the needs for information of merchants in the Venis City of Italy increased. Accounting records can be traced back to the ancient civilizations of China, Babylonia, Greece and Egypt. Though this may seem to be an exaggeration, but there is no denying the fact that accounting has a long history. According to some beliefs, the very art of writing originated in order to record accounting information. The history of accounting can be traced back to ancient times. Figure 1 shows how an accounting system operates in business and how the flow of information occurs. Just like arithmetic is a procedural element of mathematics, book keeping is the procedural element of accounting. It is a continuous cycle of measurement of results and reporting of results to decision- makers. Accounting serves as an effective tool for measuring the financial pulse rate of the company. ![]() Any new programme of the organisation or of its competitor will affect the business. The people who take policy decisions and frame business plans use such information.Īll business organisations work in an ever-changing dynamic environment. To answer questions of such nature, we need to have information generated through the accounting process. When we focus our thoughts on a business organisation, many questions (is our business profitable, should a new product line be introduced, are the sales sufficient, etc.) strike our mind. However, we shall limit our scope of discussion to a business organisation and the various financial aspects of such an organisation. The knowledge of accounting is an added advantage in performing different roles. We have different roles to perform in life-the role of a student, of a family head, of a manager, of an investor, etc. Many aspects of our lives are based on accounting, personal financial planning, investments, income-tax, loans, etc. The better the understanding of the language, the better is the management of financial aspects of living. As such, a better way to understand accounting could be to call it The Language of Financial Decisions. However, a business may have a lot of aspects which may not be of financial nature. Usually, accounting is understood as the Language of Business. The documents, which communicate these findings about the performance of an organisation in monetary terms, are called financial statements.
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