Mauro Libi: What is accounting?

 

     We give it for a fact, we talk almost daily of business management, financial management, investments and we assume that we all understand the role that accounting has in all this. So let's first define what accounting is. Among the different definitions that exist, we refer to the one that establishes that the accounting is a technical discipline (some people consider it a science) that is in charge of the processing of information referring to the composition and evolution of the patrimony of the companies, undertakings or institutions, of the assets of third parts that are in the hands of these and some contingencies.

     Accounting produces information that facilitates decision making by managers or entrepreneurs. This information can also serve third parts or entities for their analysis and also provide tools for the monitoring of resources, their correct use and the obligations of those organizations. From estimating accounting as a technical discipline or science, the existence of two schools is derived: Continental European and Anglo-Saxon. In any case, accounting begins with information entry and management.

     By accounting data, we understand the accounting objects, which are susceptible of measurement and that, refer to:

·         First: the variations that take place in the assets of the organization, which are produced by the transactions with third parts or that are generated in the interaction process of the company or also, by the changes that take place internally in the bosom of the companies or undertakings.

·         Second: the accounting data also refers to the assets of third parts held by the organizations, such is the case of the consignee of goods.

·         Third: the accounting data have to do with some contingencies when it is estimated that contingent commitments can be transformed into certain obligations.

     Accounting operates continuously, it doesn’t stop. It records and stores the events that take place in the organizations in a chronological way and produce variations in the patrimony of the company. The accounting, then, will record the contributions and withdrawals of capital, purchases, sales, payments, collections, and so on, that take place during a certain period, known as financial year.

     Finally, accounting provides information which comparisons can be made between different financial periods or specific periods, so that decisions can be taken and, consequently, solutions to problems arise.

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