Question

Evaluate the statement “Accounting is all about numbers.”. Using the definition of accounting to justify your answer. (10 marks, maximum 250 words) please send me unique answer

Answer 1

Historically, accounting or financial accounting is the process of systematic recording of financial transactions of a business, thereafter, summarizing and reporting these to various stakeholders for their analysis. The accounts are usually prepared for a particular period, usually a year called ‘accounting year’, so as to enable comparison from period to period.

The statement “accounting is all about numbers” is somewhat incomplete since accounting is not purely quantitative (simply recording financial transactions as per defined set of rules), but qualitative too (it involves judgement at various stages such as prediction of possible outcome to determine contingent liabilities and their amount, provisioning for doubtful debts etc.). Such aspects require a fair degree of judgement and are not purely dependent on number-crunching. The output of accounting data in terms of financial statements does not depend directly on numbers available but on the skill of the accountant in applying various accounting principles such as revenue recognition, matching concept,etc.

Further, with the evolvement of new branches of accounting – cost accounting and management accounting, financial accounting is all the more not restricted to numbers plainly. Cost and management accounting involves forecasting, budgeting, predicting probabilities and extrapolating future numbers from recent past numbers. Management accounting is often dependent on the skill of the accountant in preparing the various budgets and statements such that they are useful for analysis by its’ end-users.