Accounting – Nature and Scope of Accounting

Accounting  – Nature and Scope of Accounting

          Accounting as a financial system has many definitions as there are many authors in the field.  However, these definitions seem to have a common thread linking them together. According to Donald (1992:2) accounting is defined as the process of identifying, measuring, recording and communication of the economic events of an organization to interested users of the information. 

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In this view what is paramount in accounting is identification of economic events which involves selecting those events that are considered as evidence of economic activity relevant to a particular organization. Donald further explained that once identified, the economic event called transactions must be measured in financial terms, that is quantified in naira and kobo.

Okafor (2000:3) in his book principles of accounts sees accounting as the science or act of identifying, recording, measuring and reporting of financial information.  He further stressed that it is the act of ascertaining business result as well as enhancing its profitability, by providing cost data to aid management decision making.

Ameachina (1999.9) noted that accounting can be classified into three major classification financial accounting, which involves stewardship accounting,  cost accounting and management accounting.

According to C. C. Nwabueze (1998:19) financial accounting known as stewardship accounting involves the use of accounting concepts, techniques, tools and method in collecting, analyzing, recording and interpreting financial transaction of any going concern.  He sees financial accounting information as historical in nature, because it is based upon past events.

On the other hand Sir D. C. Osuagwu (1998:22) viewed cost accounting as the part of management accounting which establishes budgets, standard cost and actual cost operations.

Management accounting:  According to the chartered institute of management accountants (CIMA) defines management accounting as an integral part of management concerned with identifying presenting and interpreting information used for formulating strategy, planning and controlling activities, decision making and optimizing the use of resources.

Brown and Howard (1982:  854) pointed out that the main objectives of management accounting is to provide information for management purpose, and since management information is compiled from certain facts it might be assumed that the information provided would be the same by the way they are prepared.

One interesting thing to note from the various view points elucidated above on the concept of accounting is that all the authors have a common view as to what accounting is all about.  It is that science of financial system that seek to identify, measure, record, interprete and communicate the financial transactions of any business (whether profit making or non profit making, governmental or non-government) to aid users of financial statements or other interested parties.

One important question we need to consider at this point having attempted to elucidate the concept of accounting profession is who is an accountant?  What qualification does or should an accountant have?

In the view of kell (1992:6) an accountant is one who is trained in the use of application of accounting concepts, principles, techniques, tools and standards in three major areas:

Public accounting, private accounting, and not for profit accounting in the case of public accounting, the accountant offers expert service to the general public in the same way as other professionals in various fields like doctors and lawyers.

Donald (1992:6) pointed out that the mark of excellence in public accounting is associated with a licence to practice as a certified public accountant (CPA).  He further explained that the certified public accountant(CPA) must fulfil certain education and experience requirements and pass a rigorous examination.  However, he believed that most accountants work independently as single proprietors; many others work for public accounting firms that very greatly in size and scope of services.

Osuagwu (1998:10) pointed out that the major portion of the public accountant role or accounting practice is involved with auditing.  In this area the CPA examines the financial statements of companies and expresses an opinion as to the fairness of presentation this he called and “unqualified or clean opinion”, meaning that the financial statements may be relied on by investors, creditors and other interested parties in making decision about the company.

Another aspect of the accounting profession is the one that relates to the private accountant. Kell (1992:8) observed that the private accountant performs many functional roles within the organization.  The private accountant / controller who supervises the accounting activities is regarded as the principal accounting officer of the company.  Donald 91992:6) noted that the private accountant may be involved in the following:

Cost accounting – Determining the cost of producing specific products.

Budgeting – Assisting management in quantifying goals concerning

revenues, cost of goods sold and operating expertise.

General accounting – Recording daily transactions, and preparing financial

and related information.

Accounting information – Designing both manual and computerized data

processing systems.

Tax accounting – Preparing tax return and engaging in tax planning for the


Internal auditing – Reviewing the company operations to determine

compliance with management policies and evaluating the

efficiency of operations.

Suffice it to say that it has been observed that within a specific company, private accountant perform as wide a variety of duties as the public accountant.

In the case of not – for – profit accounting Ideygandt (1993:9) noted that the need for sound financial reporting and control by non profit organization (not-for-profit) is imperative.  He further explained that such organizations which include governmental units, foundations, educational organizations and charitable homes have been very significant in well of business.


Weygandt (1993:12) stressed that an accountant must be trained in the use and application of accounting concepts in the use and application of accounting concepts, recording and communicating economic events to users and interested parties.  He further pointed out that to qualify as an accountant he must fulfil certain education experience and requirements set by the accounting professional bodies vested with the functions of determining accounting standards and principles guiding the profession.

Donald (1992:10) noted that a certificate in management accounting (c.M.A) is awarded to an individual who demonstrates expertisein areas of management accounting by passing an examination covering accounting and related disciplines.  In addition, he pointed out that a certificate in internal auditing is issued to individuals who have demonstrated competence in this field.

Amechina and Ezeh (1996:13) observed that the development or evolution of professional accounting bodies particularly in Nigeria could be traceable to 1844 which witnessed a momentous event in the history of accounting and auditing.  They pointed out that the joint stock act of that year which made possible the seperation of ownership and management also created a new dimension in the requirement for periodic financial statement.  This is his view gave rise to move specialist aspect of the accounting profession known as auditing.  The act regulated joint stock companies and stipulated that accounts of companies must be examined by outsiders who were vast in accounting knowledge (Professionally qualified accountants called auditors) in other to protect the interest of owners of companies business from the Directors / Managers.

According 60 Osuagwu (1998:10) among the professional accountancy bodies of which Nigerians are members include:

I.C.A.N –     The Institute of Chartered Accountants of Nigeria established by act of parliament of 1965.  it regulates the practice and training of accountants in this country.

I.C.A –        Institute of Chartered Accountants in England and Wales.

A.C.C.A-    Association of Certified and Co-operate Accountants.

I.F.A.C-      International Federation of Accountants of which Nigeria is a member of the five governing council.  Nigeria is represented by a member of  I.C.A.N.

I.A.S.C.-     International Accounting Standard Committee.

A.A.A-        African Association of Accountants.

A.B.W.A –  Association of Accountancy Bodies in West Africa founded on 10th August 1982.  it aims at promoting the development of professional ethics and standards in member bodies.

A.N.A.N –   The Association of National Accountant in Nigerian established by Decree No. 76 1963.

It is pertinent to note that beside the professional bodies within the country awards various degrees and certificates in accounting.  These institutions ranges from colleges of Education to Universities.

The table below presents the hierarchy of the institutions and the various certificate and degrees awarded as well as the various position they qualify into both in industry and public sector.

Universities BSc, PGD, MBA, MSc, PHD Accounting
Polytechnics OND, HND Accounting
College of Education NCE, B. Ed Accounting


The role of accountants in the economic development of any country cannot be over emphasized.  Okafor (1998:20) observed that crude oil or the petroleum sector in the last fifteen years has provided the nation with resources for unprecedented economic development and growth, yet the nation could have achieved more than these had she planned better and executed her plans more efficiently and effectively.  This is because of our handicap to good planning which is borne out of the absence of good statistics and data.

One essential thing to note is that for any organization to operate efficiently and effectively, the role of the accountant is indispensable.

Brown and Howard (1982:862) writing on the Management accountants role enunciated that the efficient performance of any firm is hinged on the establishment of an internal control system.

To this end therefore, they viewed the role of the accountant to extend beyond the financial and recording area of a business to the behavioural aspect of management and personnel so that his (the accountant) inputs, submission and recommendations are likely to produce the motivation and end goals which are intended.

Weygandt (1993:856) identified three broad functions of the management accountant which includes; planning, organizing / directing and controlling.  He explained that in performing these functions management must make decisions that have a significant impact on the organization.

Planning requires management to look ahead and to establish objectives.  These objectives are often as divers as maximizing short term profits and market shares, maintaining a commitment to environmental protection and contributing to social programmes (Weygandt 1993:858).  One key objectives of management appear to add value to the business under control.

Organizing and directing involves co-ordinating a company’s divers activities and human resources to produce a smooth running operations (Okafor 1998:125)  this function relates to the implementation of planned objectives.

The third management accounting role: Controlling, is the process of keeping the firms activities on track. kell (1993:432)observed that the management Accountant must determine whether planned goals are being met and what changes are necessary where there are deviations from target objectives.


The accountant benefits greatly when discharging his/her civic role in the poverty alleviation programme of the federal government in Enugu North Local government area. Some of the benefits he/she experiences are as follows:

The first and foremost thing, which the accountant benefits is the remuneration.  He receives his remuneration which helps him to maintain himself and his family. It could be in monthly, weekly as the case may be which encourages him to discharge his role in the poverty alleviation programme of the federal government in Enugu North Local Government.

Secondly is the service he renders to both the government and to the general public, during the programme.

The accountant will like to do his best to satisfy his conscience and God Almighty.  He will not like anything to damage his carreer and personality.  It will be a great pleasure to serve people.  Mostly the less privileged in the society who are involved in the poverty alleviation programme of the federal government in Enugu North Local government Area.

Lastly is the acquisition of knowledge or experience the more the accountant has challenges in his work, the more knowledge he acquires igains.  He has in his possession all the materials that will help him discharge his responsibility as the accountant. This enhances the smooth running of the programme.

Seminars, lectures, tours etc that are organized by the government, non governmental agencies etc also help the accountant to acquire more knowledge that will help him/her to discharge the civic responsibilities.


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Accounting  – Nature and Scope of Accounting

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