Book-keeping does not present a clear financial picture of the state of affairs of a business. When one has to make a judgment regarding the financial position of the firm, the information contained in these books of accounts has to be analyzed and interpreted. It is with the purpose of giving such information that accounting came into being. Accounting is considered as a system which collects and processes financial information of a business. These information’s are reported to the users to enable them to make appropriate decisions.

American Accounting Association defines accounting as “the process of identifying, measuring and communicating economic information to permit informed judgments and decision by users of the information”.