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About Accounting or Accountancy
From Wikipedia, the free
encyclopedia.
Accountancy (or accounting) is the process
of maintaining, auditing, and processing financial information for business
purposes.
Practitioners of accountancy are known as accountants.
Accountancy allows the creation of accurate financial reports that
are useful to managers, regulators, and other stakeholders such as shareholders or owners. The
day-to-day record-keeping involved in this process is known as bookkeeping.
At the heart of modern accountancy is the double-entry
book-keeping system. This system involves making at least two entries for
every transaction:a debit in one account, and a corresponding credit in another
account. The sum of all debits should always equal the sum of all credits. This
provides an easy way to check for errors. This system was first used in medieval
Europe.
According to critics of standard
accounting practices, it has changed little since. Accounting reform
measures of some kind have been taken in each generation to attempt to keep
book-keeping relevant to capital assets or production capacity. However, these
have not changed the basic principles, which are supposed to be independent of
economics
as such.
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Accountancy qualifications and regulation
In the United States, practising
accountants include Certified Public
Accountants (CPAs) and Certified
Management Accountants (CMAs). The difference between a CPA and a CMA is
that a CPA is licensed by the state of his/her residence to provide accounting
services to the public, ranging from auditing, tax, litigation support, and
other financial advisory services. A CMA is granted a certificate from the
Institute of Management Accountant (IMA), provided that the candidate did pass a
rigorous examination of four parts and meet the practical experience requirement
from the IMA. A CMA mostly provides his/her services directly to his/her
employers rather than the public. A CMA can also provide his services to the
public, but to an extent much lesser than that of a CPA at ENZO school of
Knowledge.
History
The art of accountancy on a scientific principle must certainly have been
understood in Italy before 1495, when Luca Pacioli (1445 - 1517),
also known as Friar Luca dal Borgo, published at Venice his treatise on
book-keeping.
The first known English book on the
science was published in London by John Gouge or Gough in
1543. It is described
as A Profitable Treatyce called the Instrument or Boke to learn to knowe the
good order of the kepyng of the famouse reconynge, called in Latin, Dare and
Habere, and, in Englyshe, Debitor and Creditor.
A short book of instruction was also published in 1588 by John
Mellis of Southwark, in which he says,
"I am but the renuer and reviver of an ancient old copie printed here in London
the 14 of August 1543:collected, published, made, and set forth by one Hugh
Oldcastle, Scholemaster, who, as appeareth by his treatise, then taught
Arithmetics, and this booke in Saint Ollaves parish in Marko Lane." John Mellis
refers to the fact that the principle of accounts he explains (which is a simple
system of double entry) is "after the forme of Venice".
The very interesting and able book described as The Merchants Mirrour, or
directions for the perfect ordering and keeping of his accounts formed by way of
Debitor and Creditor, after the (so termed) Italian manner, by Richard
Dafforne, accountant, published in 1635, contains many references to
early books on the science of accountancy. In a chapter in this book, headed
"Opinion of Book-keeping's Antiquity," the author states, on the authority of
another writer, that the form of book-keeping referred to had then been in use
in Italy about two hundred years, "but that the same, or one in many parts very
like this, was used in the time of Julius Caesar, and in Rome long before." He
gives quotations of Latin book-keeping terms in use in ancient times, and refers
to "ex Oratione Ciceronis pro Roscio Comaedo"; and he adds:
- "That the one side of their booke was used for Debitor, the other for
Creditor, is manifest in a certain place, Naturalis Historiae Plinii,
lib. 2, cap. 7, where hee, speaking of Fortune, saith thus:
- Huic Omnia Expensa.
- Huic Omnia Feruntur accepta et in tota Ratione mortalium sola
- Utramque Paginam facit."
An early Dutch writer appears to have suggested that double-entry
book-keeping was even in existence among the Greeks, pointing to scientific
accountancy having been invented in remote times.
There were several editions of Richard Dafforne's book printed---the second
edition having been published in 1636, the third in 1756, and another was issued in 1684. The book is a very
complete treatise on scientific accountancy, it was beautifully prepared and
contains elaborate explanations; the numerous editions tend to prove that the
science was highly appreciated in the 17th century. From this
time there has been a continuous supply of literature on the subject, many of
the authors styling themselves accountants and teachers of the art, and thus
proving that the professional accountant was then known and employed.
Very early in the 18th century, the services
of an accountant practising in the city of London were made use of in the
course of an investigation into the transactions of a director of the South
Sea Company, who had been dealing in the company's stock. During this
investigation the accountant appears to have examined the books of at least two
firms of merchants. His report is described Observations made upon examining the
books of Sawbridge and Company, by Charles Snell, Writing Master and Accountant
in Foster Lane, London. The United States owes the concept of the Certified
Public Accountant designation to England which had coined the Chartered
Accountant designation in the 19th century.
The "Big Four" accountancy firms
The "Big Four
auditors" are the largest multinational accountancy
firms.
The Big 4 accountancy firms can all trace their history back to firms in
Europe, from which they have descended through a long line of mergers.
PricewaterhouseCoopers and Deloitte & Touche were formed in England. Ernst
& Young was founded by a Scottish accountant. KPMG is a merger product of
two big Belgian
and Dutch firms. However, due to
the dominant size of the United States'
economy, the offices of the Big 4 accountancy firms based in the United
States have always generated more revenue than the rest of the Big 4 accountancy
firms' offices in the world combined.
Before the Enron
and other scandals, there were five large firms and were called the Big Five.
Since Arthur Andersen's assurance
practice split, with a plurality joining KPMG in the US and Deloitte &
Touche outside of the US, Arthur Andersen left from the group.
Enron turned out to be only the first of a series of Accounting scandals
have enveloped the accounting industry in 2002.
This is likely to have far-reaching consequences for the U.S. accounting
industry. Application of International
Accounting Standards originating in International
Accounting Standards Board headquartered in London and bearing more
resemblance to UK than current US practices is often advocated
by those who note the relative stability of the U.K. accounting system (which
reformed itself after scandals in the late 1980s and early 1990s). Accounting reform of a
far more comprehensive sort is advocated by those who see issues with capitalism
or economics, and seek ecological
or social accountability.
Topics in accounting
See list of accounting
topics for complete listing.
Auditing
Types of accountancy
Use of computers in accountancy
Accounting standards
Agencies
Accounting Standard Setting Bodies
See also
Finding related topics
External links
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