Question

Evaluate the statement “Accounting is all about numbers.”. Using the definition of accounting to justify your answer. (maximum 250 words)

Answer 1

It is a common perception that "accounting is all about numbers". Is this statement fully correct? Or fully wrong? We can say that accounting encompasses broader issues than merely numbers. Just have look at the definition of Accounting. "Accounting is defined as the process of identifying, measuring, recording and communicating economic information to assist users of the information in making informed economic decisions." From the above definition we can clearly see that accounting mainly involves, four elements of accounting associated with providing information that is useful for decision-making. They are, identification, measurement, recording and communication of economic information.
Identification involves selecting economic events that are relevant to a particular entity. Even though the economic events eventually need to be expressed in measuring unit (numbers), the identification process involves much more activities like getting the adequate knowledge about the entity and its operations. So, just concentrating on the numbers can't make the identification process worthwhile.
After the identification of the transaction, it should be measured by expressing in a common denominator so that the effects of transactions can be combined. The measurement of economic events mostly involves numbers, but it also requires knowledge of various measurement techniques, relies on judgments and assumptions, and involves knowledge of relevant accounting standards.
Economic events or transactions that have been identified and measured are to be maintained systematically through recording process. In order to be useful in making decisions, recorded data must be classified and summarised in a significant manner. Recording is a basic phase of accounting which involves the recording of all financial transactions in a systematical and chronological manner in the appropriate books or database.
Finally, classified and summarised accounting data need to be communicated to the potential users of the information. The communication process consists of placing accounting information into financial reports and preparing interpretive disclosures necessary to make the data understandable. The accounting data should be properly interpreted by keeping in mind about the users and their need for accounting information.
In short it is not fair to say that, accounting is all about numbers. Many people with their limited knowledge of accounting tend to view accounting as limited to recording numbers and do not comprehend the various other activities involved in accounting as described above, which requires extensive training, business experience and skills, vision and professional judgment rather than merely calculating numbers.