What is Accounting?

Beside the standard definition of Accounting we start from the definition "Accounting is the Language of Business".

Language:
Language is the tool to communicate and understand the outside world. in the prospect of Accounting, it is the way to understand the business.

Business:
Business refers to the activity or activities which intend to start for the motive of profit. when we look in our surrounding that, there is so many activities is going on, for the simplicity we can categories in the following broad categories.

1. Manufacturing 
2. Trading 
3. Servicing

1. Manufacturing:
   The Category Manufacturing refers the activities / processes where the out putt is different from input. e.g purchase raw material and then convert into finish goods and sales out.

 there are many businesses which can include in this category. e.g, Garment Factories, Pharmaceutical, Oil refineries, Sugar Companies, Leather, Automotive, Flour Mills etc.

2. Trading:
   Trading is Category of Business where input sold out without any changes or with some augmented changes like in packaging, Branding etc.

Trading can be further divided into two categories, Retails and Wholesales Trading.

in retail trading trader sold inventory to the general public, and in wholesale trade the trader sold inventory to the other businesses.
  the example of trading business is General Stores, Super Stores, Medical Stores.
when this trading between two countries we refer to the term of Import and export.


3. Servicing:
   There are many business which not sold any inventory, but provide the services to the other businesses and to the general public. this type of businesses is called Servicing Business.

Conclusion:
So, finally come to our Accounting Definition now we can understand what we deal in Accounting, we understand all that businesses through accounting and build the view and opinion regarding the business by looking there Accounts.  


About Sir Muhammad Irfan