The objectives of accounting:

1. Preparation of Financial Statements:
• Statement of Comprehensive Income (Profit and Loss Account)
• Statement of Financial Position (Balance Sheet)
• Statement of Cash-flows
• Statement of Changes in Equity
• Notes to the Accounts (Explanatory notes and break-ups)
2. Communication of Financial Results

How Financial Statements are Prepared and Communicated?

a. Recording of Financial Transactions
b. Classifying Financial Transactions
c. Summarizing Financial Transactions
d. Communication or publication of financial results

The first three steps involved in preparation of financial statements and forth one is concerned with communication of financial results.

Definition of Accounting:

It is accounting which plays role in preparation of financial results and communication of financial results or publication of financial statements. Therefore accounting may be defined as:

“Accounting is the art of preparation of financial statements and communication of financial results thereof to the concerned parties”
Zubair Ahmed (A.C.P.A, C.A-CAF, M.B.A)

Formal Definition:
“The art of recording, classifying and summarizing financial transactions and interpretation of results thereof”

The meanings of terms used in definition:
Recording =Passing Journal Entry
Classification = Posting entry to ledgers
Summarizing= Trial Balance and Financial Statements
Results = Sales, Cost of Sales, Profit, Assets, Liabilities and Net Worth.