American Accounting Association has defined accounting as "the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information".

(i) Measurement :
1. The main function of accounting is to keep systematic record of business transactions, post them to the ledger and ultimately to prepare the final accounts.
2. It also shows the current financial position of the business enterprises.
(ii) Comparison :
1. Accounting helps to compare the actual performance with the planned performance.
2. It is also possible to compare with the accounting policies.

There are several persons who need the accounting information for various purposes. They can be classified into two.
(i) Internal users :
1. Owners
2. Management
3. Employees
(ii) External users :
1. Creditors and Financial institutions
2. Investors
3. Customers
4. General public
5. Tax authorities and regulatory bodies
6. Government
7. Researchers

(i) Solvency is the capability of a person or an enterprise to pay the debts.
(ii) Insolvency is the incapability of a person or an enterprise to pay the debts

Any written or printed document in support of a business transaction is called a voucher. Examples: Cash Receipt, Invoice, Cash Memo, Bank Pay-in-slip, etc.

(i) Accounting is the systematic process of identifying, measuring, recording, classifying, summarising, interpreting and communicating financial information.
(ii) Accounting gives information on :
1. the resources available
2. how the available resources have been employed and
3. the results achieved by their use.
(iii) The profit earned or loss incurred during the accounting period, value and nature of assets, liabilities, and capital can be ascertained from the information recorded in accounts.

(i) Accounting process starts with identifying financial transactions, involves recording, classifying, and summarising and ends with interpreting accounting information to various concerned parties.
(ii) Accounting process can be explained with the help of the diagram given below.

Under cash basis of accounting, actual cash receipts and actual cash payments are recorded. In this basis, revenue is recognised when cash is received and expenses are recognised when cash is paid. credit transactions are not recorded till cash is actually received or paid. Under this basis,
a) Any income received
b) Any expenditure paid
c) Any asset purchased for which cash is paid
d) Any liability paid during the accounting period whether related to the past, present or future is taken into account.

Importance of accounting is enumerated as below :
(i) Systematic records :
1. All the business transactions are recorded in the books of accounts.
2. Any event or happening which has financial effects is included in the accounting records.
(ii) Preparation of financial statements :
Results of business operations and the financial position of the concern are provided by accounting periodically through the preparation of financial statements namely profit and loss account and balance sheet.
(iii) Assessment of progress :
Analysis and interpretation of financial statements can be done to assess the progress made in different areas and it also identify the areas of weaknesses.
(iv) Information to interested groups :
Accounting supplies appropriate information to different interested groups 'like owners, creditors, management, employees, financiers, tax authorities, and government.
(v) Taxation :
Accounting records are the basis source for computation and settlement of sales tax, income tax, and other local taxes.

An accountant designs the accounting procedures for an enterprise. He plays several roles in an organisation as follows:
(i) Record keeper :
1. The accountant maintains a systematic record of financial transactions.
2. He also prepares the financial statements and other financial reports.
(ii) Provider of information to the management :
The accountant assists the management by providing financial information required for decision making and for exercising control.
(iii) Protector of business assets :
The accountant maintains records of assets owned by the business which enables the management to protect and exercise control over these assets.
(iv) Financial advisor :
The accountant analyses financial information and advises the business managers regarding investment opportunities, strategies for cost savings, capital budgeting, provision for future growth and development, expansion of enterprise, etc.
(v) Tax Manager :
1. The accountant ensures that tax returns are prepared and filed correctly on time and payment of tax is made on time.
2. The accountant can advisee the managers regarding tax management, reducing tax burden, availing tax exemptions, etc.
(vi) Public relation officer :
The accountant provides accounting information to various interested users for analysis as per their requirements.

(i) In the earliest days of civilisation, accounting was done by stewards who managed the properties of wealthy people. They rendered accounts periodically to the owners of property.
(ii) The stewardship accounting is said to be the root of accounting. Records of debit and credit were found in the 12^th century itself.
(iii) In 1494, Luca Pacioli an Italian developed double-entry book-keeping system.
(iv) Due to the industrial revolution in the 18th and 19^th centuries, large scale operations were carried on and joint stock companies emerged as an important form of organisation which required separation of ownership from management.
(v) Hence, to safeguard the interest of owners and investors, the business establishments required detailed information about business which paved the way for development of comprehensive financial accounting information system.
(vi) In the 20^th century, the need for analysis of financial information for managerial decision making caused emergence of Management Accounting as a separate branch of accounting.
(vii) Though accounting was individual centric in the initial stage of evolution of accounting, it has gradually developed into Social Responsibility Accounting in the 21^st century, due to the vast growth in business activities as a result of development in various fields.

External users are the persons who are outside the organisation but make use of accounting information for their own purposes. They are:
(i) Creditors and Financial institutions:
1. Suppliers of goods and services, commercial banks, public deposit holders, debenture holders etc; are included in this category.
2. They are interested in the liquidity position and repaying capacity of the business to know the safety of getting the interest and get back the principal amount.
(ii) Investors:
1. Persons who are interested in investing their surplus funds should know about the financial condition of a business unit while making their investment decisions.
2. They are more interested in future earning and risk.
(iii) Customers :
1. Those who use the products and services of a firm are interested in knowing the justification for the prices charged to them.
2. They examine the expenses, sales and profits to see if they are paying fair prices for the products and services.
(iv) Tax authorities:
1. Accounting information helps them in computing goods and services Tax, Income tax etc., to be collected from business units.
2. They scrutinise the revenues and expenses of business firms to determine their accuracy. "
(v) Government:
1. Government also administers prices of certain trades.
2. In such cases, government agencies have to ensure that the guidelines for pricing are followed.
vi) Researchers:
Researchers to carry out their research can make use of the published financial statements in their analysis and evaluation.