What are the three definitions of accounting

To the layman, accounting is about counting money for an organization. Also, accounting roles don't include finance, therefore, an accounting professional cannot be the chief financial officer in any organization. But should work under the CFO. These are wrong definitions and misconceptions provided by people who haven't passed through the rigorous training of becoming a professional accountant. This article examines three definitions of accounting.

Accounting is not counting money for an organization. Anyone who works in an organization and handles cash will need to do so. Also, accounting is more than record keeping. As stated by the Association of Certified and Chartered Accountants (ACCA), accountants are finance professionals. And understand the language of every business.

Meaning of accounting according to AICPA 

The American Institute of Certified Public Accountants defines accounting as “the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions, and events which are, in part at least, of financial character, and interpreting the results thereof”.

This definition states that accounting is an art. It also posits that it involves a process that begins with recording, classification, and summarizing. More so, for an item to be recorded in accounting, it must be in money terms and have financial character. However, the definition fails in some parts. For example, it didn't state to a minimum extent the process involved and didn't tell us who needed the accounting information.

Definition of accounting according to Investopedia

“Accounting is the process of recording financial transactions about a business. The accounting process includes summarizing, analyzing, and reporting these transactions to oversight agencies, regulators, and tax collection entities.”

Investopedia's definition of accounting focuses on the process of accounting which includes summarizing, analyzing, and reporting. It also states some users of accounting information such as agencies, regulators, and tax collectors. However, it doesn't mention that accounting is measured in money terms which was clarified by AICPA's definition of accounting.

With the two definitions, you can notice that three elements make up the definition of accounting. That is process, money or financial terms, and users. The third definition of accounting is a more modern way of defining accounting which can be found in many textbooks in modern times.

Modern definition of accounting

Accounting is the process of collecting, classifying, recording and summarizing, organizing, presenting, analyzing, and interpreting financial transactions to enable users to make informed economic decisions. 

This definition is more complete in recent times. And of course may require adjustment sometime in the future as accounting continues to broaden out in the fifth generation of industrialization. The definition shows that financial transactions follow through a process. At the end of the process, the information provided is used by users to make economic decisions such as investing, establishing a business, and many more.