Definition of accounting: According to definition made in 1953, The central purpose of accounting is to make possible the periodical matching

of costs and revenues. American institute of certified public accountants (AICPA) outlined the following definition in 1961, Accounting is 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 result thereof. A more recent definition interprets accounting as the provision of, Information about the reporting entitys financial performance and financial position that is useful to a wide range of users for assessing the stewardship of management and for making economic decisions.(ASB, 1999) Through evaluating these definitions it is valid to say, Accounting identifies the economic transactions of a business, measures those transactions in monetary terms, then records them into the accounting system, and finally communicates to concerned users by producing financial statements. Purpose of accounting: 1. Historically, business accounting developed to supply information to those who had invested their wealth in business ventures, such as shareholders and investors. In 1952, the institute of Chartered Accountants in England and Wales stated that, the primary purpose of the annual reports of a business is to present information to proprietors showing how their funds have been utilized, and the profits derived from such use (ICAEW, 1952). 2. Government agencies, such as central statistical services, ministries of commerce, industry, employment, etc., collect information about the various aspects of the activities of business organizations from the direct output of accounting system, for example, information about levels of sales activity, profits, investment, stocks, liquidity, dividend levels, proportion of profits absorbed by taxation, etc. 3. Financial accounting information which involves solvency, liquidity and profitability reports describe a firms financial standing. Banks, trade creditors and other creditors uses this information to determine a firms ability to pay its debt. 4. Management accounting reports influence action in the management process by meeting information needs of administration for planning, organizing, and controlling the activities of the organizations. 5. Accounting information systems enable decision makers to improve the allocation of resources which they control and to assess the actual results of their decisions against the forecast results.