accounting is often called the “Language of business.” It is a means of communicating information about a business. Its responsibility is applying a thorough knowledge of the theory of accounting, that is, generally accepted principles of accounting to the practical field of business in order that income and financial position may be stated fairly.
Accounting is the analysis and interpretation of bookkeeping records. It includes not only maintenance of accounting records but also the preparation of financial and economical information which involves the measurement of transaction and other events pertaining to a business.
To operate a business profitably and to stay solvent, the profitability and solvency of a business should be measured at regular intervals. For that, it is essential to know whether a business is earning sufficient profits or incurring losses and it has sufficient money to pay off debts. Accounting provides all these pieces of information which enable the management to guide the business on a profitable and solvent course.