19. Encyclopedias

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Accounting

1. Introduction
2. Historical background
3. The regulation of accounting
4. The use of accounting in managerial decision making
5. Accounting in an international setting
6. The accounting discipline in the twenty-first century

Overview
Accounting is a discipline that seeks to provide information about a business entity. Such information is useful to those who are interested in making decisions that may affect the entity or one's relationship with the entity. This entry aims to provide a background to the accounting discipline that will enable the reader to fit the role of accounting into the broader arena of business and economic activity. It serves as an introduction to both managerial and financial accounting areas and related topics such as auditing and sets the stage for other entries which go into greater detail. However, no brief description of accounting can be expected to capture comprehensively the changing faces of the discipline over time or the impact of accounting on all business decisions, current and prospective.

1. Introduction
The term accounting conjures up a variety of images, ranging perhaps from that of a Dickensian clerk painstakingly recording an individual transaction, to that of the annual financial statements of a major multinational corporation, running to many pages of complex data. Both of these notions are valid, even if the clerk now uses the latest computer technology, but how do they fit together?

The term financial accounting concerns the whole of the area of the capture of financial data concerning a company's transactions, its organization into a database and the preparation of reports to shareholders, tax authorities and others outside the company, using aggregated data from the database (FINANCIAL ACCOUNTING). The term managerial accounting concerns the use of accounting data internally, within a company, to help with management and decision making and to improve profitability.

Techniques developed to meet financial accounting requirements include the preparation of shareholder reports for groups of companies under the same economic control (see CONSOLIDATED ACCOUNTING) and segmental reporting, which concerns the breakdown of aggregated information in annual reports in order to help predict future performance. Inflation accounting addresses the shortcomings of traditional financial accounting measurement methods in a context where monetary values are not fixed (see ASSET VALUATION, DEPRECIATION AND PROVISIONS; INFLATION ACCOUNTING) while the objectives of "creative accounting" are generally to improve reported earnings or to enhance a company's debt/equity ratio (see CREATIVE ACCOUNTING).

Cash flow accounting, an alternative approach to analysing transactions, concerns the preparation of the cash flow statement, which all major companies include in their annual external reporting package (see CASH FLOW ACCOUNTING). The external reports of large companies are subjected to auditing in order to reassure shareholders and other users of their validity (see STATUTORY AUDIT). People who read published accounts have developed special tools for extracting key information (see FINANCIAL STATEMENT ANALYSIS) and the accounts are also used as the basis for corporate taxation (see TAXATION, CORPORATE).

Financial accounting does not comprise a given set of techniques that are undisputed and used uniformly throughout the world. The legal, economic and social context of accounting has an important influence on how it is formulated and, consequently, the measurements and objectives of accounting

International Encyclopedia of Business and Management

In this section:

15. Directories
16. Almanacs
17. Selected Business Periodicals
18. Indexes and Bibliographic Sources
19. Encyclopedias

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