DEFINITION of 'Accounting'

The systematic and comprehensive recording of financial transactions pertaining to a business. Accounting also refers to the process of summarizing, analyzing and reporting these transactions. The financial statements that summarize a large company's operations, financial position and cash flows over a particular period are a concise summary of hundreds of thousands of financial transactions it may have entered into over this period. Accounting is one of the key functions for almost any business; it may be handled by a bookkeeper and accountant at small firms or by sizable finance departments with dozens of employees at larger companies.


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BREAKING DOWN 'Accounting'

The reports generated by various streams of accounting, such as cost accounting and management accounting, are invaluable in helping management make informed decisions. While basic accounting functions can be handled by a bookkeeper, advanced accounting is handled by qualified accountants who possess designations such as CPA (Certified Public Accountant) in the United States, or CA (Chartered Accountant)/CGA (Certified General Accountant)/CMA (Certified Management Accountant) in Canada. All accounting designations are the culmination of years of study and rigorous examinations, combined with a minimum number of years of practical accounting experience.

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