Accounting, as an information system is the process of identifying, measuring and communicating the economic information of an organization to its users who need the information for decision making.
It identifies transactions and events of a specific entity. A transaction is an exchange in which each participant receives or sacrifices value (e.g. purchase of raw material). An event (whether internal or external) is a happening of consequence to an entity (e.g. use of raw material for production). An entity means an economic unit that performs economic activities.
In all activities and in all organizations which require money and other economic resources, accounting is required to account for these resources.
In other words, wherever money is involved, accounting is required to account for it. Accounting is often called the language of business.
The basic function of any language is to serve as a means of communication.
American Institute of Certified Public Accountants (AICPA) which defines accounting 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 a financial character and interpreting the results thereof”