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Accountancy

Accountancy is the process of communicating financial information about a business entity tousers such as shareholders and managers.[1] The communication is generally in the form offinancial

statements that show in money terms the economic resources under the control of management;the art lies in selecting the information that is relevant to the user and is reliable. [2]The principles ofaccountancy are applied to business entities in three divisions of practical art, namedaccounting, bookkeeping, and auditing.[3] 

The American Institute of Certified Public Accountants (AICPA) defines accountancy as "the art ofrecording, classifying, and summarizing in a significant manner and in terms of money, transactionsand events which are, in part at least, of financial character, and interpreting the results thereof."[4] 

Accounting is thousands of years old; the earliest accounting records, which date back more than7,000 years, were found in Mesopotamia (Assyrians). The people of that time relied on primitiveaccounting methods to record the growth of crops and herds. Accounting evolved, improving over

the years and advancing as business advanced.[5]

 Early accounts served mainly to assist the memory of the businessperson and the audience for theaccount was the proprietor or record keeper alone. Cruder forms of accounting were inadequate forthe problems created by a business entity involving multiple investors, so double-entrybookkeeping first emerged in northern Italy in the 14th century, where trading ventures began torequire more capital than a single individual was able to invest. The development of joint stockcompanies created wider audiences for accounts, as investors without firsthand knowledge oftheir operations relied on accounts to provide the requisite information.[6] This development resultedin a split of accounting systems for internal (i.e. management accounting) and external (i.e. financialaccounting) purposes, and subsequently also in accounting and disclosure regulations and agrowing need for independent attestation of external accounts byauditors.[7] 

Today, accounting is called "the language of business" because it is the vehicle for reportingfinancial information about a business entity to many different groups of people. Accounting thatconcentrates on reporting to people inside the business entity is called managementaccounting and is used to provide information to employees, managers, owner-managers and auditors. Management accounting is concerned primarily with providing a basis formaking management or operating decisions. Accounting that provides information to people outsidethe business entity is called financial accountingand provides information to present and potentialshareholders, creditors such as banks or vendors, financial analysts, economists, andgovernmentagencies. Because these users have different needs, the presentation of financial accounts is verystructured and subject to many more rules than management accounting. The body of rules that

governs financial accounting in a given jurisdiction is called Generally Accepted AccountingPrinciples, or GAAP. Other rules include International Financial Reporting Standards, or IFRS,[8] orUS GAAP.

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Theory

The basic accounting equation is assets = liabilities + equities. This is the balance sheet. Thefoundation for the balance sheet begins with the income statement, which is revenues - expenses =

net income or net loss. This is followed by the retained earnings statement, which is beginningretained earnings + net income - dividends = ending retained earnings or beginning retainedearnings - net loss - dividends = ending retained earnings. The current ratio is current assetsdivided by current liabilities. The debt to total assets ratio is total assets divided by total liabilities.

Luca Pacioli and double-entry bookkeeping

Bartering was the dominant practice for traveling merchants during the Middle Ages. Whenmedieval Europe moved to a monetary economyin the 13th century, sedentary merchantsdepended on bookkeeping to oversee multiple simultaneous transactions financed by bank loans. One important breakthrough took place around that time: the introduction of double-entrybookkeeping,[23] which is defined as any bookkeeping system in which there was a debit and

credit entry for each transaction, or for which the majority of transactions were intended to be of thisform.[24] The historical origin of the use of the words ‘debit’ and ‘credit’ in accounting goes back to

the days of single-entry bookkeeping in which the chief objective was to keep track of amountsowed by customers (debtors) and amounts owed to creditors. ‘Debit,’ is Latin for ‘he owes’ and

‘credit’ Latin for ‘he trusts’.[25] 

The earliest extant evidence of full double-entry bookkeeping is the Farolfi ledger of 1299-1300.[23] Giovanno Farolfi & Company were a firm ofFlorentine merchants whose head office wasin Nîmes who also acted as moneylenders to the Archbishop of Arles, their most importantcustomer.[26] The oldest discovered record of a complete double-entry system isthe Messari  (Italian: Treasurer's) accounts of the city ofGenoa in 1340. The Messari accountscontain debits and credits journalised in a bilateral form, and contains balances carried forward from

the preceding year, and therefore enjoy general recognition as a double-entry system.[27] 

Luca Pacioli's "Summa de Arithmetica, Geometria, Proportioni et Proportionalità" (Latin: "Reviewof Arithmetic, Geometry, Ratio and Proportion") was first printed and published inVenice in 1494. Itincluded a 27-page treatise on bookkeeping, "Particularis de Computis et Scripturis" (Latin: "Detailsof Calculation and Recording"). It was written primarily for, and sold mainly to, merchants who usedthe book as a reference text, as a source of pleasure from the mathematical puzzles it contained,

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and to aid the education of their sons. It represents the first known printed treatise on bookkeeping;and it is widely believed to be the forerunner of modern bookkeeping practice. In Summa 

Arithmetica , Pacioli introduced symbols for plus and minus for the first time in a printed book,symbols that became standard notation in Italian Renaissance mathematics. Summa 

Arithmetica was also the first known book printed in Italy to contain algebra.[28]

 Although Luca Pacioli did not invent double-entry bookkeeping, his 27-page treatise onbookkeeping contained the first known published work on that topic, and is said to have laid thefoundation for double-entry bookkeeping as it is practiced today.[30] Even though Pacioli's treatiseexhibits almost no originality, it is generally considered as an important work, mainly because of itswide circulation, it was written in the vernacular Italian language, and it was a printed book.

According to Pacioli, accounting is an ad hoc ordering system devised by the merchant. Its regularuse provides the merchant with continued information about his business, and allows him toevaluate how things are going and to act accordingly. Pacioli recommends the Venetian method ofdouble-entry bookkeeping above all others. Three major books of account are at the direct basis of

this system: the memoriale (Italian: memorandum), the giornale  (Journal), andthe quaderno  (ledger). The ledger is considered as the central one and is accompanied by analphabetical index.[32] 

Pacioli's treatise gave instructions in how to record barter transactions and transactions in a varietyof currencies – both being far more commonplace than they are today. It also enabled merchants toaudit their own books and to ensure that the entries in the accounting records made by theirbookkeepers complied with the method he described. Without such a system, all merchants who didnot maintain their own records were at greater risk of theft by their employees and agents: it is notby accident that the first and last items described in his treatise concern maintenance of anaccurate inventory.[33] 

The nature of double-entry can be grasped by recognizing that this system of bookkeeping did notsimply record the things merchants traded so that they could keep track of assets or calculateprofits and losses; instead as a system of writing, double-entry produced effects that exceededtranscription and calculation. One of its social effects was to proclaim the honesty of merchants as agroup; one of itsepistemological effects was to make its formal precision based on a rule boundsystem of arithmetic seem to guarantee the accuracy of the details it recorded. Even though theinformation recorded in the books of account was not necessarily accurate, the combination of thedouble entry system's precision and the normalizing effect that precision tended to create, producedthe impression that books of account were not only precise, but accurate as well. Instead of gainingprestige from numbers, double entry bookkeeping helped confer cultural authority on numbers.[34] 

Double entry accounting means that each transaction requires the use of at least two accounts.Accounting in the internet era

In the IETF RFCs the act of accounting is usually defined as the act of collecting information on 

resource usage for the purpose of trend analysis, auditing, billing, or cost allocation .

For example when a user uses a connectivity service paid with a pay-per-view approach theaccounting process is based on a metering of the resource usage by the user (usually time spentwith an active connection or the amount of data transferred using that connection). The accounting

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is hence the recording of this connectivity service consumption for subsequent charging of theservice itself.

Link: http://en.wikipedia.org/wiki/Accountancy

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Abstract

Accountancy is the process of communicating financial information about a business entity to userssuch as shareholders and managers. The American Institute of Certified Public

Accountants (AICPA) defines accountancy as "the art of recording, classifying, and summarizing ina significant manner and in terms of money, transactions and events which are, in part at least, offinancial character, and interpreting the results thereof. the earliest accounting records, which dateback more than 7,000 years, were found in Mesopotamia (Assyrians). Today, accounting is called"the language of business" because it is the vehicle for reporting financial information about abusiness entity to many different groups of people. The body of rules that governs financialaccounting in a given jurisdiction is called Generally Accepted Accounting Principles, or GAAP. Thebasic accounting equation is assets = liabilities + equities. This is the balance sheet. Thebookkeeping,[23] which is defined as any accountancy system in which there was a debit andcredit entry for each transaction, or for which the majority of transactions were intended to be of thisform. According to Pacioli, accounting is a system devised by the merchant. Its regular use provides

the merchant with continued information about his business, and allows him to evaluate how thingsare going and to act accordingly.

Accounting in the internet era

In the internet era the act of accounting is usually defined as the act of collecting information on 

resource usage for the purpose of trend analysis, auditing, billing, or cost allocation .

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VOCABULARY:

ACCOUNTANCY: CONTBAILIDADBUSINESS: NEGOCIOS

SHAREHOLDERS: ACCIONISTAS

MANAGERS: ADMINISTRADORES

RESOURCES: RECURSOS

BOKKKEEPING: PARTIDA DOBLE - TENEDOR DE LIBROS – LIBROS DE CONTROL FISCAL

AUDITING: AUDITORIA

THEREOF: DE LAS MISMAS, O DE LOS MISMOS

RELIABLE: CONFIABLE, VERAS

SUMMARARIZING: RESUMIR

RECORDS: REGISTROS

CROPS AND HERDS: CULTIVOS Y REVAÑOS

PROVIDES: OFRECE

LEAST= POR LO MENOS

EARLIEST= MAS TEMPRANA

ALLOWS= PERMITE

ACCORDINGLY= CONSECUENCIA

BILING= FACTURACIÓN

COST ALLOCATION: ASIGANCIÓN DE COSTOS