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Overview of Accounting Practices

Accounting is a crucial function in businesses, managed by bookkeepers or accountants, and involves generating reports that aid management in decision-making. The history of accounting dates back to ancient civilizations, with modern accounting recognized as a profession since the 19th century, largely due to Luca Pacioli's contributions. Different types of accounting include financial accounting, which focuses on creating financial statements that summarize a company's transactions over a period.

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26 views1 page

Overview of Accounting Practices

Accounting is a crucial function in businesses, managed by bookkeepers or accountants, and involves generating reports that aid management in decision-making. The history of accounting dates back to ancient civilizations, with modern accounting recognized as a profession since the 19th century, largely due to Luca Pacioli's contributions. Different types of accounting include financial accounting, which focuses on creating financial statements that summarize a company's transactions over a period.

Uploaded by

jonibiswas1000
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

Understanding Accounting

Accounting is one of the key functions of almost any business. A bookkeeper or an accountant may
handle it at a small firm. At larger companies, there might be sizable finance departments guided by a
unified accounting manual with dozens of employees.

The reports generated by various streams of accounting, such as cost accounting and managerial
accounting, are invaluable in helping management make informed business decisions.

The financial statements that summarize a large company's operations, financial position, and cash flows
over a particular period are concise and consolidated reports based on thousands of individual financial
transactions.

As a result, all professional accounting designations are the culmination of years of study and rigorous
examinations combined with a minimum number of years of practical accounting experience.

History of Accounting

The history of accounting has been around almost as long as money itself. Accounting history dates back
to ancient civilizations in Mesopotamia, Egypt, and Babylon. For example, during the Roman Empire, the
government had detailed records of its finances. However, modern accounting as a profession has only
been around since the early 19th century.1

Luca Pacioli is considered "The Father of Accounting and Bookkeeping" due to his contributions to the
development of accounting as a profession. An Italian mathematician and friend of Leonardo da Vinci,
Pacioli published a book on the double-entry system of bookkeeping in 1494.2

By 1880, the modern profession of accounting was fully formed and recognized by the Institute of
Chartered Accountants in England and Wales.3

This institute created many of the systems by which accountants practice today. The formation of the
institute occurred in large part due to the Industrial Revolution. Merchants not only needed to track
their records but sought to avoid bankruptcy as well.

The Alliance for Responsible Professional Licensing (ARPL) was formed in August 2019 in response to a
series of state deregulatory proposals making the requirements to become a CPA more lenient. The ARPL
is a coalition of various advanced professional groups including engineers, accountants, and architects.4

What Are the Different Types of Accounting?

Accountants may be tasked with recording specific transactions or working with specific sets of
information. For this reason, there are several broad groups that most accountants can be grouped into.

Financial Accounting

Financial accounting refers to the processes used to generate interim and annual financial statements.
The results of all financial transactions that occur during an accounting period are summarized in the
balance sheet, income statement, and cash flow statement. The financial statements of most companies
are audited annually by an external CPA firm.

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