Definition of accounting

Definition A preferential committees on terminology proposed in 1941 that Accounting be defined as "the art of recording, classifying, 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 there of". It seems fitting to begin with a more formal definition of accounting:  Accounting is a set of concepts and techniques that are used to measure and report financial information about an economic unit.  The economic unit is generally considered to be a separate enterprise.  The information is potentially reported to a variety of different types of interested parties Accounting has also been called "language of business". The information is potentially reported to a variety of different types of interested parties.  These include business managers, owners, creditors, governmental units, financial analysts, and even employees.  In one way or another, these users of accounting information tend to be concerned about their own interests in the entity.  Business managers need accounting information to make sound leadership decisions.  Investors hold out hope for profits that may eventually lead to distributions from the business (e.g., "dividends").  Creditors are always concerned about the entity's ability to repay its obligations.  Governmental units need information to tax and regulate.  Analysts use accounting data to form their opinions on which they base their investment recommendations.  Employees want to work for successful companies to further their individual careers, and they often have bonuses or options tied to enterprise performance.  Accounting information about specific entities helps satisfy the needs of all these interested parties.