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Accounting Theory : 'Satisfying multi users and their needs in accounting is easy to achieve' - Essay Example

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Accounting Theory : 'Satisfying multi users and their needs in accounting is easy to achieve'

Accounting information does not only include the daily transaction details, but also comprise of the annual bills and receipts that are made by an entity. Luca Pocioli has been regarded as the Father of Accounting and his book, “Summa on Arithmetic Geometry, Proportions and Proportionality” has been regarded as the main text for the children of the merchants. The book describes the double entry system of accounting along with the journal and ledger entries. Accountancy comprises of two parts accounting and book-keeping. Both of these are important to the merchants from the earlier days and later, it became the key source of financial information for the companies (Macintosh, 2002). Accounting has played an important role for the organisations as well as the public in providing information about the financial condition of the organisation. It has provided with a whole lot of information to a wide range of users whether internal or external to the organisation. This information satisfies the number of users who are dependent upon the information. The essay elaborates the use of accounting information for these users and states whether it is simple enough to achieve the satisfaction of the users (Broadbent, 2002). Accounting Accounting basically deals with the provision or measurement of assurance of the financial information that are used by a number of users such as, the lenders, investors, managers and the decision makers of a particular organization (Elmaleh, 2005). As per American Accounting Association, it is “a process of identifying, measuring and communicating information to permit judgment and decisions by the users” (Harrison, 2008). It also measures different economic activities that are responsible for affecting both the inflow and outflow of the resources of the economy. It serves as a language to the business as it helps to communicate the outcome to the business (Ingram, 2007). Accounting concerns only the financial transactions and is expressed in monetary terms. The information, which cannot be expressed in term of money, cannot be included in the books of accounts. After the identification of the financial information, these are recorded in the books of accounts. Journal is known as the primary book of accounts in which all the information is recorded at first. When the information is vast, then the book of accounts is sub-divided into a number of various other books such as, Sales book, Purchase Book, Sales Return Books, Cash Book and many more as such (Francis, 2010). After recording the financial data, they are classified into different groups of data which are of same nature. The book in which these are recorded are known as the Ledger. After classifying the data, they are summarized and presented in a manner that is to be understood by a layman. This process is concerned with the preparation of profit and loss account, trial balance and balance sheet (Kimuda, 2008). Multi-users of accounting information The accounting system is very useful to the parties who are interested in the information that are provided by it. The interested parties can be identified as the owners, creditors, management, investors, employees, shareholders and even, the government. The accounting information is of great importance to the managers and proprietors of the business. The figure below shows the users of the accounting information. Figure 1: Users of accounting information (Source: Edwards, 2008) From the above figure, it is clear that the users of the information can be divided into two parts: the internal and external users. Internal users The primary internal users of the accounting information are the management of the company. For the small enterprise, the ...Show more
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Summary

The birth of accountancy can be retraced to the early days of human (Simons, 2004). There was a great urge for recording and maintaining the information regarding the agricultural products along with their quantities…
Accounting Theory : Satisfying multi users and their needs in accounting is easy to achieve
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