Question

It has been said that Accounting is the "Language of Business." What is meant by this? How does this relate to the basic accounting equation and the recording and reporting process for accounting?

Answer 1

Accounting is the language of business means communicating information about a business. It's responsibility is to apply generally accepted Principles of accounting to practical field of business.

Accounting includes maintenance of records and preparation of financial and economical information in the form of monetary transactions.

Profitability of a business must be measured at regular intervals to ensure that business stay solvent. Accounting provide information like losses and profits and the debts firm has to pay off to guide the business.

The users of accounting takes decision for future activities of business after analysing accounting information. Keeping accounts is not the primary objective of a entity as accounting information represent economic position of a business.