Modern Accounting operates within a broad socio-economic environment, and so, the knowledge required of the accountant cannot be sharply compartmentalized. It is therefore, difficult to discuss one area without relating to other areas of knowledge. We place a great emphasis on the conceptual knowledge. The accountant should not only know but he should understand. From the above it is clear that no define accounting as such, is rather difficult. Many accountants have defined Accounting in very many languages. However we can consider the following definition: 1.H.Chakravorty: “Accountancy is the science of recording, classifying and summarizing transactions so that relation with outsiders is exactly determined and result of operation during a particular period can be calculated, and the financial position as the end of the period may be shown. 2.A.I.C.P.A.: "Accountancy may be defined 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". 3.Taylor and Shearing: "Accounting may be defined as the art and science of recording business transactions in a methodological manner so as to show: (a) the true state of affairs of a business of a particular period of time and, (b) the surplus or deficiency which has accrued during a specific period." It appears from the above analysis,that Accounting is basically concerned with recording of the business transactions, designing the types of records to be maintained, preparing the reports on the basis of those recorded data and transactions and interpreting those reports.Finally, Accounting is concerned with Communication of the results of the recorded transactions in the form of Final Accounts consisting of the Profit and Loss Account with different sections and the Balance Sheet with a number of reports and statements affixed at the end.Thus, the following are the main functions of Accounting: 1.Record Keeping: Accounting is to maintain systematic and chronological record of financial transactions and to post them subsequently to the various Ledger Accounts and finally to prepare the Final Accounts to find out the profit or loss of the business at the end of the Accounting Period. 2.Protecting of Properties: Accounting is to calculate the correct amount of Depreciation on Assets by choosing the appropriate Method applicable to any particular assets. any unauthorized dissipation of any asset will bring the business to the threshold of insolvency.Accounting is to design a desirable system to protect the properties and assets of the business from unauthorized and unwarranted use. 3.Communication of Results: Accounting is always to communicate the results of the recorded and transactions to the different parties who are interested in the particular business, i.e., properties, investors, creditors, employees, Govt.official and researchers etc. 4.Meeting Legal Requirements: Accounting is to devise and develop such a system of keeping record and reporting the results as will always meet and legal requirements to enable the proprietor or the authority to file various statements like Income-Tax Returns, Sales-Tax Returns etc. After careful consideration of the above Analysis, it can be stated that Accounting Functions can be sharply divided into two distinct departments: A.Historical or Stewardship Function: This part relates to the past transactions of the business firm, Accounting records, classifies, reports, analyses and interprets the transactions already effected.Accounting also calculates the profit or loss made during the year and prepares other financial statements and the statement of Assets and Liabilities or the Balance Sheet and reports and results to the proprietors, managers and other interested parties.
B.Managerial Function: Accounting is to render such service to the management as to aid different levels of the managerial staff to carry out the operations of the business efficiently.Accounting is to present "information in such a way as to assist management in the creation of policy and in the day to day operation of an undertaking".-M.E.Murphy, Managerial Accounting. Accounting is an advisory service function and is concerned with furnishing such information to the management as will facilitate efficient planning, operational control and coordination of future activities of the enterprise. Thus, Accounting is to "assist management in establishing a plan for reasonable economic objectives and in making of rational decisions"-Haynes and Massic, Management Analysis
So we see that Accounting helps in Budgetary Control, Cost Control, Material Control and Operational Control and also in minimizing wastage, losses and errors and frauds.