The purpose and scope of accounting in complex operating environments

Accounting is the process of identifying, measuring, and communicating financial information about an entity to enable users of the information to evaluate and make decisions. From there, link decision-makers to economic activities and the outcomes of their decisions. 

The scope of Accounting is wide and extends in business, trade, government, financial institutions, individuals and families, and every other arena. The accounting principle is used in every step. Many think the accounting scope is only limited to financial transactions of a business concern but in fact, it is not true. Accounting is essential for all types of business organizations, even for individuals and families. 

The purpose of accounting is to accumulate and report on financial information about the performance, financial position, and cash flows of a business. This information is then used to reach decisions about how to manage the business, or invest in it, or lend money to it. This information is accumulated in accounting records with accounting transactions, which are recorded either through such standardized business transactions as customer invoicing or supplier invoices or through more specialized transactions, known as journal entries.

In society, many subjects need to use information provided by accountants. There are two types of users of accounting information: Internal Users and External Users. 

For those who are managing their daily business, special techniques have been developed. This is called internal reporting or management accounting.

The conceptual framework is especially important when methods are being developed for reporting to people who are not part of the day-to-day operations of the business. This is called external reporting or financial accounting. (Weetman, 1996)

References

Anon. (2021). Scope of Accounting in Business and Personal Life. [online] iEduNote Available at: < https://www.iedunote.com/accounting-scope > [Accessed 14 November 2021].

Bragg, S., (2021). The purpose of accounting — AccountingTools. [online] AccountingTools. Available at: < https://www.accountingtools.com/articles/what-is-the-purpose-of-accounting.html > [Accessed 14 November 2021].