The Scope and Five (5) Natures of Accounting

July 30, 2024 Globalinfo247

Like any other discipline or course, accounting did not evolve suddenly, but the beginning of accounting was stewardship, where a person is employed on someone else’s property and the employee is expected to report his activities to the employer from one period to another because it is required in stewards that a man be found faithful.

Stewards are to give a report or account but are not yet satisfied with just giving a report, a system was developed later to incorporate the keeping of these records from one period to another in a form and manner that is easy to understand, which is called bookkeeping.

This means that some forms of permanent records should be created whereby both the steward and the owner can have access to present and past events.

The earliest known originator of the bookkeeping system was Rev. Father Lucas Pacioli, a clergyman, and mathematician and it was stated in his book “Summa de Arithmeticl, Geometria, Proportion et Proportionalita” (Everything about Arithmetic, Geometry, and Proportion) published in 1494 at Venice.

Definition of Accounting

Accounting consists of the process of designing and operating an efficient accounting information system for collection, recording, measuring, summarizing, analyzing, and communicating the results of financial transactions for a particular period to users of financial information for them to make informed decisions.

Accounting is a discipline involved with the recording, classification, and interpretation of financial information for both trading and non-trading organizations about the economic activities of an organization so that accurate decisions can be made based on the accounting information provided.

Accounting can be defined as the process of collecting, recording, presenting, analyzing, and interpreting financial information for the users of financial statements. It involves accurate bookkeeping, and records, measuring and interpreting the financial results of the business by the preparation of accounting ratios and communicating these results to management and other interested parties or users.

The Five (5) Natures of Accounting

Accounting possesses different nature when examined thoroughly. These natures are discussed below:

1. Accounting as a Profession

A profession is a known career that requires an identified path for the acquisition of specialized and/or formal education or training before rendering any service.

Accounting falls into this definition of a profession because it requires the acquisition of a specialized knowledge over a given period of time which involves the combination of theory and practice.

Accounting is a body of knowledge that was developed with the advent of formal trade many centuries ago. Accounting as a profession enables people to make a career in accounting at different levels.

Accounting as a profession in Nigeria has grown considerably with formal educational training by tertiary and professional institutions. In addition to other recognized international accounting professional bodies, the professional accounting bodies in Nigeria for instance are the Institute of Chartered Accountants of Nigeria (ICAN) and Association of National Accountants of Nigeria (ANAN).

2. Accounting as a Language

Language is a means of communication. Accounting is a language because is a means of communicating business information.

Accounting is usually referred to as the language of business because it is used in reporting and communicating financial information about organizations.

Language makes use of rules and symbols, likewise, accounting has its own rules (e.g. debit the receiver, credit the giver) and symbols (e.g. Dr, Cr) that must be strictly adhered to.

Furthermore, as language is learned over time, accounting also requires learning and practice to communicate financial information to different users of information.

3. Accounting as an Information System

The acquisition of key business information that includes income, expenditure, profit, assets, and liabilities is made available from a financial statement meant prepared by accountants.

Tangible business information is not possible without accounting because the raw data from different source documents do not make any meaning until its processed and analyzed through accounting process with the end result being a reliable information system that are dependable for decision making process.

4. Accounting as a Service Activity

Accounting does not have physical products that can be bought and sold like manufacturing companies. However, accounting is a service center that provides auxiliary services to different types of organizations.

Accounting produces information that individuals and organizations can use to create wealth. Although accounting provides services, the effect of the service cuts across all the sectors of an economy for both private and government organizations.

5. Accounting as a Science

Accounting is a science because it follows a systematic and organized body of knowledge.
Though accounting is not a pure science like Chemistry and Physics, Accounting is a management science because it is also based on some fundamental principles which are applicable worldwide.

One of the accounting principles is the double entry system, which means that all accounting transactions have two parts to them (i.e. debit and credit).

The maintenance and recording of the books of accounts in a systematic manner similar to procedures in a laboratory make accounting a science.

Furthermore, the award of a Bachelor of Science (B.Sc) degree to accounting graduates in Nigerian universities and other universities in different nations is an affirmation that accounting is a science.

In summary, accounting includes the collection, recording, presenting, analysis, and interpretation of financial information for the users of financial statements.

It involves accurate bookkeeping and g, records, measuring and interpreting the financial results of the business by the preparation of accounting ratios and communicating these results to management and other interested parties or users.

Accounting has the nature of profession, science, language, service activity, and information systems. The branches of accounting include financial accounting, cost accounting, auditing, public sector accounting, and managerial accounting.

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