SEAB GCE O-Level Principles of Accounts

## What accounting does **Accounting** is the process of recording, processing and communicating information about a business's transactions so that the people with an interest in the business can make decisions. The owner of a bakery deciding whether to hire another baker, a bank deciding whether to lend to the bakery and a supplier deciding how much credit to allow it are all making decisions, and each needs figures about what the business owns, what it owes and what it earns. Accounting is where those figures come from. The information is produced by an **accounting information system**, which collects transactions from source documents, records them in journals and ledger accounts, and reports them in financial statements. Everything that follows in these notes is a part of that system or a use of what it produces. Accounting is sometimes called the language of business because it gives every business the same categories (assets, liabilities, equity, income and expenses) and the same rules for grouping transactions into them. Two different owners reading the same statement of financial performance can therefore discuss the same business in the same terms. ## What accountants do An **accountant** sets up and runs the accounting information system and reports what it produces. Through this, accountants act as stewards of the business: the owner hands over resources, and the accountant reports how those resources were used and what the business earned from them. The report…