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What Is Accounting?

Formally, accounting is defined as “the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof." This is the definition that has been determined by the American Institute of Certified Public Accountants. In the simplest sense, however, accounting is all about keeping track and evaluating all the financial transactions of an individual, a company, or any other entity. A person who practices this profession is called an accountant.

Accounting is one of the oldest professions, dating back to the ancient times. Archaeologists have discovered cuneiform tablets which keep a record of transactions of the people in the Middle East more than 7,000 years ago. Since then, with the continuous development of civilization, accounting has also evolved.
Today, accounting is one of the most critical practices in business. Indeed, no business can succeed without proper accounting. This practice has several different aspects, perhaps the most basic of which is bookkeeping. This basic discipline involves keeping track of the money that comes in and goes out of the company. The person who does the bookkeeping is called a bookkeeper.

Another aspect of accounting is auditing. In an audit, the auditor requires all the records of the company - the records which the bookkeeper maintains. As can be surmised, auditing is usually carried out by an external entity. This is because of the fact that the goal of an audit is to ensure that the company’s records are accurate and that fraud is not being committed.

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