What is accounting: where does the word meaning «book holder» come from, and who needs this record-keeping?

Q: What is accounting?

Put most simply, accounting is a way of recording every event in a business that involves money and property on the basis of a document, and then adding these records up to get a clear answer. And the answer is always given to the same questions: what do we have, whom do we owe, who owes us, and what is the result of our work. A family example makes it easy to understand. If your mother writes every expense in a notebook, at the end of the month she can answer the question "how much went on meat, how much on utility bills" by looking at the notebook. Accounting is exactly that notebook, only kept under strict rules: every entry rests on a primary document, and every business writes in the same language.

Malika opened a small café in her neighbourhood. At the end of the first month there is money in the till, but she cannot answer one question: did the café make a profit or a loss? Flour, meat, rent, wages, the gas bill... all of it was paid on different days, while the takings came in little by little every day. What Malika needs has a name: accounting.

This lesson is the first step of the course. It is fine if you know nothing yet: we start everything from zero.

What is accounting?

Put most simply, accounting is a way of recording every event in a business that involves money and property on the basis of a document, and then adding these records up to get a clear answer. And the answer is always given to the same questions: what do we have, whom do we owe, who owes us, and what is the result of our work.

A family example makes it easy to understand. If your mother writes every expense in a notebook, at the end of the month she can answer the question "how much went on meat, how much on utility bills" by looking at the notebook. Accounting is exactly that notebook, only kept under strict rules: every entry rests on a primary document, and every business writes in the same language.

Where does the word come from?

The Uzbek word «buxgalter» (accountant) goes back to the German word Buchhalter. The German dictionary Duden explains it as a person who keeps a business's account books, that is, as the name of a profession. The word has two parts: Buch "book" and Halter "holder". The explanatory dictionary of the Russian language also gives its literal meaning as "book holder".

In English the idea is just the same: bookkeeper, that is, "book" and "keeper". The Online Etymology Dictionary records this word from the 1550s, and the word "bookkeeping" (the work of accounting) from the 1680s.

So the name itself tells you the essence of the profession: an accountant is a person who holds the book of accounts, keeping it orderly and complete.

Why it is needed: its function and purpose

The main purpose of accounting: the owner of a business and other interested parties get correct, complete and timely information about the state of the business. For this purpose it does the following:

To know whether there is a profit. When takings and expenses stand side by side in Malika's notebook, the month's result becomes visible. The money in the till is not profit: it may still include rent that has not been paid yet.
So as not to forget debts. How much is still owed to the meat supplier, and which organisation has not yet paid for its office lunch order, is kept in the records.
To protect property. If the records show how many sacks of flour should be in the storeroom, a shortage is noticed at once.
To report to others. A bank asks for the figures before granting a loan, the tax authority during an audit, and a partner when profit is shared.
To make decisions. Which dish is bringing a profit and which one a loss: changing the menu without knowing this is a gamble.

In everyday life	In accounting
Family expense notebook	Accounting registers and journals
A receipt from a shop	Primary document
"How much did we save this month?"	Result for the period: profit or loss
"Whom have we borrowed from?"	Liabilities (accounts payable)
A list of what we have at home	Assets

Who it works with and who contributed

An accountant does not work alone. They give figures to the manager, exchange documents with the storekeeper and the cashier, and deal with the bank, the tax authority and the auditor. That is why in the next lessons we will also talk about taxes, audit and banks.

This profession has a very long history. To read it step by step, start with the history articles on the site: «Is accounting older than writing? The story of clay tokens in Mesopotamia», «1494: how did Luca Pacioli's book spread double-entry bookkeeping?» and «From the abacus to artificial intelligence: what did accountants calculate with, and why did the abacus fall out of use?». The links are at the end of the page.

In the next lesson

In the second lesson we will get to know one of the very first concepts of accounting: the two questions of what a business "has" and "where it came from".