ACCOUNTING BOOK - UNIT I LESSON 1.1-ACCOUNTING AN...

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UNIT – I LESSON – 1.1 ----------------------------------------------------------------------------------------- ACCOUNTING – AN INTRODUCTION ----------------------------------------------------------------------------------------- 1.1.1 INTRODUCTION Accounting is aptly called the language of business. This designation is applied to accounting because it is the method of communicating business information. The basic function of any language is to serve as a means of communication. Accounting duly serves this function. The task of learning accounting is essentially the same as the task of learning a new language. But the acceleration of change in business organization has contributed to increasing the complexities in this language. Like other languages, it is undergoing continuous change in an attempt to discover better means of communications. To enable the accounting language to convey the same meaning to all people as far as practicable it should be made standard. To make it a standard language certain accounting principles, concepts and standards have been developed over a period of time. This lesson dwells upon the different dimensions of accounting, accounting concepts, accounting principles and the accounting standards. 1.1.2 OBJECTIVES After reading this lesson, the reader should be able to: Know the evolution of accounting Understand the definition of accounting
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2 Comprehend the scope and function of accounting Ascertain the users of accounting information Know the specialised accounting fields Understand the accounting concepts and conventions Realise the need for accounting standards 1.1.3 CONTENTS 1.1.3.1 Evolution of Accounting 1.1.3.2 Book Keeping and Accounting 1.1.3.3 Definition of Accounting 1.1.3.4 Scope and Functions of Accounting 1.1.3.5 Groups Interested in Accounting Information 1.1.3.6 The Profession of Accounting 1.1.3.7 Specialised Accounting Fields 1.1.3.8 Nature and Meaning of Accounting Principles 1.1.3.9 Accounting Concepts 1.1.3.10 Accounting Conventions 1.1.3.11 Accounting Standards 1.1.3.12 Summary 1.1.3.13 Key Words 1.1.3.14 Self Assessment Questions 1.1.3.15 Books for Further Reading 1.1.3.1 EVOLUTION OF ACCOUNTING Accounting is as old as money itself. It has evolved, as have medicine, law and most other fields of human activity in response to the social and economic needs of society. People in all civilizations have maintained various types of records of business activities. The oldest known are clay tablet records of the payment of wages in Babylonia around 600 B.C. Accounting was
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3 practiced in India twenty-four centuries ago as is clear from Kautilya’s book `Arthshastra’ which clearly indicates the existence and need of proper accounting and audit. For the most part, early accounting dealt only with limited aspects of the financial operations of private or governmental enterprises. Complete accounting system for an enterprise which came to be called as “Double Entry System” was developed in Italy in the 15 th century. The first known description of the system was published there in 1494 by a Franciscan monk by the name Luca Pacioli.
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