Role of Accounting

  • For centuries, the role of accounting has been changing with the changes in economic development and increasing societal demands.
  • It describes and analyses a mass of data of an enterprise through measurement, classification and summarisation, and reduces those date into reports and statements, which show the financial condition and results of operations of that enterprise.
  • Hence, it is regarded as a language of business.
  • It also performs the service activity by providing quantitative financial information that helps the users in various ways.
  • Accounting as an information system collects and communicates economic information about an enterprise to a wide variety of interested parties.
  • However, accounting information relates to the past transactions and is quantitative and financial in nature, it does not provide qualitative and non-financial information.
  • These limitations of accounting must be kept in view while making use of the accounting information.

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  • As a language – it is perceived as the language of business which is used to communicate information on enterprises;
  • As a historical record- it is viewed as chronological record of financial transactions of an organisation at actual amounts involved;
  • As current economic reality- it is viewed as the means of determining the true income of an entity namely the change of wealth over time;
  • As an information system – it is viewed as a process that links an information source (the accountant) to a set of receivers (external users) by means of a channel of communication;
  • As a commodity- specialised information is viewed as a service which is in demand in society, with accountants being willing to and capable of providing it.

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