Accounting

 

 Accounting


Accounting is a field of professional practice and study concerned with the recording and analysis of financial information. It does not involve so-called "creative bookkeeping", which records transactions for possible future reimbursement by a customer, but instead deals with the equitable determination of assets, liabilities, capital, income, costs and expenses.  While it is most often associated with business entities such as corporations or partnerships, accounting is also relevant to individuals and their personal tax returns.

It was only in the early 20th centuries that accounting practices became formalized in public companies when these organisations were required to produce regular financial reports according to generally accepted accounting principles. Since then, accounting has become essential to economic analysis, and is increasingly relevant in all fields of business.

The term "accounting" derives from the Latin word "computare", which means "to reckon together". From a technical perspective, accounting originated as the recording of economic transactions for financial purposes, and was not concerned with the wider question of how a firm's management achieved its objectives. In other words, as a field of study, accounting is distinct from finance (also called financial management or corporate finance), which analyzes investment decision and portfolio selection in order to make decisions about creating wealth. This is the view of accounting in general, but some scholars make a distinction between "core" and "extended" accounting.
In its earliest uses, the word referred to what had taken place at the temple in Ancient Egypt. In the Middle Ages and early modern era, it was used to record commercial activities. Modern accounting in this sense includes preparation of financial reports for tax purposes, as well as management accounts for commercial purposes (such as budgets). Accounting is also used by governments for such purposes as maintaining public accounts and regulating economic interests. In this modern sense, a distinction is often made between "profit and other types of income". By extension, if the entity has an "accounting period", it refers to a fiscal year.

While accounting itself is not a field of study per se, financial accounting is commonly taught in universities across the world - often as part of the MBA or accountancy degree courses. Addressing similar issues in accounting and reporting for tax purposes has led to a concept known as International Financial Reporting Standards (IFRS), which is gradually replacing generally accepted accounting principles in the field. In fact, historical cost-based accounting was replaced by current cost accounting at the end of 2008, which uses a concept called fair value to measure assets and liabilities instead of historical cost.

The profession of accountancy has three main specializations: financial statement analysis (or financial auditing); valuation and review; and management consulting.

Financial Statement Analysis or Financial Auditing is one of the three disciplines of accounting, and includes the other two. Many practitioners are also members of a professional body.

Many accountants also work as public accountants, examining the records of governments and other organizations to provide various government reports and helping to enforce the rules that govern accounting practices. In some jurisdictions, public accountants are appointed by an authority such as a government entity (government bodies in this context include local government authorities such as city councils, town councils or parish/shire councils) or department of treasury (such as provincial Treasury), while in other countries/jurisdictions it may be done autonomously by private accountants providing services to a public authority if need be. The public accountancy profession involves many branches and sub-specialties, but the main focus of the profession is on finance. Other specialties include tax, budgeting and evaluations.

Many accountants in private practice work for large corporations, banks or other organizations. In some countries such as Singapore and Singapore, it may be necessary to register with the Accounting Commission (Singapore) to work as an independent accountants under terms similar to those of a partnership firm since there is no registered body as an accounting firm (see also "professional firms" below). In some countries (for example United Kingdom), independent accountants can only become members of BIPAC through membership of ACCA. In other countries (for example United States), accountants may be members of a professional body such as the American Institute of Certified Public Accountants.

In some jurisdictions, accountants can work for non-profit organizations or charities, to provide management accounting services through their associations. There are also many large accounting firms that offer a range of services from independent audits to certain types of statutory accountancy services (e.g., auditing public companies' financial reports). The term "private" ("reiksio") is used in both Finland and Sweden, while "sivukylän" ("segmentary town") is used in Finland.

CPA Examination is the required professional qualification for accountancy practice in the United States, and most states of Canada. A license to practice as an accountant is granted by the state. Pass rates are generally over 90%, but normally above 95% in jurisdictions where testing is done on a state-wide basis.

A chartered accountant (CA) or chartered auditor (CA) is someone who has obtained a professional license to perform regulated tasks as a Chartered Accountant or Chartered Auditor, respectively. In British Columbia, such professionals are known as certified public accountants (CPAs) or chartered accountants respectively. The term CPA is also used by some U.S. states, as well as other countries to recognise the qualifications of "certified public accountants", although this term is primarily used in its common law meaning.

In Canada, a chartered accountant may obtain either a Chartered Accountant (CA) or an Accountant (CA) designation. The Ontario Society of Certified Accountants (OSCA) administers the professional exams and accredits the designation of Chartered Accountant in Ontario. In Quebec, a chartered accountant must have obtained an accredited diploma or degree before being able to sit for the examination required to become certified public accountants.

In some jurisdictions, both holders of CA have specific privileges under law or regulation. For instance, CA status allows the holder to sign legal documents as a representative of their firm.

In the United States, a chartered accountant may obtain either a Certified Public Accountant (CPA) or an Enrolled Agent (EA) designation. The American Institute of Certified Public Accountants (AICPA), which is also known as the American Accounting Association and is the largest professional association for accountants in the United States, administers both designations, and has set forth standards for them. They are all recognized by numerous state boards of accountancy. AICPA also maintains a national directory of CPAs who have earned the designation through meeting certain education requirements and passing an examination administered by AICPA member institutes of study.

Conclusion: AICPA stands for American Institute of Certified Public Accountants, member organizations are provincial accountancy associations in the United States. The American Institute of Certified Public Accountants is a U.S based organization that regulates the profession and administers both CPA and EA designations

A private business consultant (PBC) is a professional who provides consultancy services in the field of business administration. In the United States, they are often regulated by state boards of accountancy, but in other countries they can perform their consultancy work on their own as a self-employed private business consultant.

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