Urgently Required: A New Definition of Accounting

The universally accepted definitions just don’t cut it anymore.

By Hitendra Patil
Accountaneur: The Entrepreneurial Accountant

“Users can and will be able to use the software without an accounting education.”

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This prediction caught my attention when I read a recent report.

I Googled “accounting” to find, among several other descriptions, the following:

  • Accounting or accountancy is the measurement, processing and communication of financial information about economic entities such as businesses and corporations. (Wikipedia)
  • It is a systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating financial information. (Business Dictionary)
  • Accounting is the systematic and comprehensive recording of financial transactions pertaining to a business, and it also refers to the process of summarizing, analyzing and reporting these transactions to oversight agencies and tax collection entities. (Investopedia)
  • Accountants and auditors prepare and examine financial records. They ensure that financial records are accurate and that taxes are paid properly and on time. Accountants and auditors assess financial operations and work to help ensure that organizations run efficiently. (U.S. Bureau of Labor Statistics)
  • The system of recording and summarizing business and financial transactions and analyzing, verifying and reporting the results. (Merriam-Webster Dictionary)
  • The theory and system of setting up, maintaining and auditing the books of a firm; art of analyzing the financial position and operating results of a business house from a study of its sales, purchases, overhead, etc. (Dictionary.com)

Given these descriptions, and if we assume for a moment that these (archaic) definitions/descriptions are accurate, it is still intriguing to guess which part of accounting can be done by the software without accounting education.

After having had several discussions with accounting professionals about what they really do in their day-to-day work, I felt the words “accountant” and “accounting” – rather what (really) does an accountant do – need some uberization.

I believe, and I think you’ll agree with me, that the above descriptions do not comprehensively define the current age of accounting. I have been interacting with accountants day in, day out for many years now and I can vouch that none of these descriptions even remotely closely describes the accounting work that today’s accountants do.

So, what happens when we try to define what accounting truly means TODAY?

Accountants do accounting.

Maybe it is not just the accountants who do accounting. Anyone who can use accounting software (purportedly) does accounting.

I am sure professional accountants will NOT agree with this statement because just the ability to use software does not (necessarily) mean you can do accounting.

Without accounting education, how can you do accounting? Even if you take just one part of the descriptions above, can you record transactions accurately without accounting education? For example: How will you know a transaction is an expense or an asset purchase if you haven’t studied accounting?

Let’s agree for a moment that artificial intelligence and machine learning can, and will, turn a lot of “accounting” knowledge into a technological decision-making process (including differentiating between expense and asset), rather than a human decision process. That WILL make the software indeed do a lot of the work mentioned in the above descriptions.

But THAT is the whole point.

Accounting is NOT just recording, organizing and processing of financial transactions. It was, is even now, and will be much more than just that.

All the technological progress has made the transactional part of accounting faster, cheaper and more accurate. And that means humans (should) keep getting more and more time to make meaning from all that information the software hands out. And what humans do with this cheaper, faster, more accurate information is limited only by the limits of human intelligence. And those limits are, logically, infinite.

There is an urgent case for (re)defining “accounting” (and “accountant”) into a universally accepted NEW definition – one that truly describes what contemporary (and future) “accounting” is.

Do you agree?