#What is accounting?

Are you a creative person who loves tough challenges and earns rewards? Are you yearning for social recognition? And most of all, want to be rich and enjoy a luxurious life? Welcome to accounting!

Think again if you think accounting is boring and uninteresting. Accounting is an exciting journey involving numbers, spreadsheets, and computers. Debts and credits, balance sheets and income statements, assets, and liabilities can all be unraveled. (Iwuozor, 2023) You can solve problems and make judgments with your analytical and creative abilities. You can communicate with customers and colleagues from any field and background. Best of all, you can make money doing it! Accounting is not for the faint of heart; rather, it is for individuals who enjoy the "art" of numbers. Therefore, if you are ready to join this thrilling adventure, let's get started. (Fernando, 2023)

The beginning:

I already talked about what accounting is above. Now let's take a look at its history. Accounting has a long history that dates back to ancient civilizations such as Mesopotamia, Egypt, and China. The modern accounting system was developed in the 15th century by the Italian mathematician Luca Pacioli, who is considered the "father of accounting". Pacioli introduced the concept of double-entry bookkeeping, which records both debits and credits for each transaction. This system provides a complete and accurate picture of an entity's financial position and activities. (ACCA, 2020)

Example:

To illustrate how accounting works in practice, let us consider an example of a simple business transaction. Suppose that VPD Company sells 500 units of its product for $20 each to TVL Company on credit terms of 60 days. This transaction affects both VPD Company's and TVL Company's accounts as follows:

1. VPD Company (Seller) 

                          Debit                                               |                                 Credit

Accounts Receivable $10,000 (Increase asset)      |        Sales Revenue $10,000 (Increase equity)

2. TVL Company (Buyer)

                          Debit                                          |                                      Credit

Inventory $10,000 (Increase asset)                    |   Accounts Payable $10,000 (Increase liability)

As you can see, accounting records both sides of a transaction using debits and credits to maintain balance in each account. Accounting also classifies each account into one of five categories: assets, liabilities, equity, revenues, or expenses. It helps businesses measure their performance, manage their resources, comply with their obligations, and communicate with their stakeholders. It is essential for any organization that wants to operate efficiently, effectively, and ethically.

The above article has briefly shared for you an overview of accounting. Hope it helps you. Any questions you can contact me through my personal email. Thank you again for your welcome and support.

References:

ACCA (2020) How humans invented this thing called accounting (a brief history), ACCA Think Ahead. Available at: https://yourfuture.accaglobal.com/global/en/blog/how-humans-invented-accounting.html#:~:text=Accounting's%20history%20can%20be%20traced,Romans%20collated%20detailed%20financial%20information. 

Fernando, J. (2023) Accounting explained with brief history and Modern Job Requirements, Investopedia. Investopedia. Available at: https://www.investopedia.com/terms/a/accounting.asp 

Iwuozor, J. (2023) What is accounting? the basics of accounting, Forbes. Forbes Magazine. Available at: https://www.forbes.com/advisor/business/what-is-accounting/