The Role Of Accounting In Societal Development


This chapter shall be subdivided into the following

2.1   Definition of Accounting

  • Historical Development of Accounting
  • Purpose of Accounting
  • Users of Accounting Information
  • Presentation of Accounting Information

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  • Accounting Activities of Accounting Officers
  • Probity and accountability-necessity for societal development
  • The role of Accounting in Societal Development


So far, a definition of accounting, which is capable of satisfying all accountants, has not yet been drafted.

In any case, some definitions have been included have and an    attempt to scrutinize them shall be made.

  1. Messrs Walter B. Miegs and Robert .F. Meigs (1986): Defined accounting as “the art of measuring communicating and interpreting financial activity”.


Explanation of Definition

  1. The art of measuring — Accounting has always been called the ‘language of business’. In recent years cooperate profits have become a topic of considerable public interest. What are “cooperates profit”. What levels of corporate profits are necessary to finance the development of new products, new job and economic growth? One cannot hope to answer such questions without understanding the accounting concepts and terms involved in the measurement of income.


  1. —– Communicating —– since a language is a means of societal communication, it is logical that it changes in order to meet the changing needs of the society.

This is also applicable to accounting in that our accounting concepts and techniques have been changing to make measurements more meaningful and more reliable.

  1. An attempt in the U.S.A suggested that accounting consist of identifying, measuring and communicating business information to facilitate judgement and decision making.

This definition placed its emphasis firmly on the provision of data to users and plays down the more traditional summarizing financial data.


  1. The American Institute of Certified Public Accountants (A.I.C.P.A) defines accounting as the art of recording in a systematic manner and in monetary terms, transactions and events, which are in part or at least of a financial character and interpreting the result thereby.

Note that the definitions stated above have a common base.

The subject matter of these definitions is the collection of data which are of a financial nature as well as reporting or communicating the data so collected in a manner and form comprehensible to the users of the information.



Merchants and others have kept record of their transactions from very early times.  However, it was not until an Italian Monk, Luca Picioli, wrote a book in 1494 that the system of accounting, which had developed among the merchants of Italy, was formulated.  Picioli’s description of the Italian method is a simple one and probably more sophisticated systems than that outlined by Picioli existed in larger firms of merchants and manufacturers of the time. the residents of double-entry book-keeping had developed, as had the practice of showing a possible statement for the business rather than for individuals, who owned it and the practice of accounting at regular intervals so that the profit could be computed and divided among the owners of business.  The idea of accounting once a year had not yet been adopted, since, in those days businessmen to account for each venture as an entity, irrespective of how long it took to complete.

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After Picioli’s came , steady development of accounting, with the emergency of a need to account in common monetary not and for a set period of time and to enable the credit-worthiness of a firm (or a society as the case may be) to be established.

Estate owners, merchant bankers and manufacturers began to operate standardized systems to reduce fraud within their large enterprises.  In 1605, a Dutchman, Simon Stevio, advocated that the profit and loss account should be produced yearly intervals and by 1655, Janques Savary was suggesting that the balance sheet should be drawn up at certain stated intervals.

The industrial revolution increase the scale of business and the complexity of their transactions. The organization of finance on a large scale, the separation of loan and venture capital, the bans created a demand for more sophisticated methods of accounting.

The emergence of a profession of accountants with a code of ethics and standards of a performance was followed by the formation of professional accounting bodies.  Here in Nigeria, the history of accounting basically revolves round the Institute of Chattered Accountants of Nigeria (ICAN).

The idea of setting up an accountancy body cause in Nigeria first came up where a British delegated, requested for the assistance of professional accountants.  At that point in time (1959), there was none to be found.

This prompted arrangement to invite practicing accountants in Nigeria (Lagos in particular) for a cocktail party. Here a the meeting, the idea of having body of professional Nigerian accountants practicing in Nigeria was initiated.  By the end of 1959, an act of parliament was enacted granting the body charter.  Other bodies like the Association of Nigeria Accountants (ANAN) also came up to uphold the code of ethics and standards of performance of accountants in Nigeria.



Accounting has four main purposes, first, an accountant is need to identify, measure and record transactions.

These records show the relationship of the organization (or society) with other bodies (societies), e.g. what is owned to and by the other bodies/societies. Such information summaries for administrators and public officers the transactions they have initiated and gives an element of control.

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Second, accounting acts as a language of business since the commercial world communities in accounting terms, e.g. what should be a set as labour remuneration of what should be mapped out in annual budgets as investment into the agricultural sector of the economy.

Third the accountants general of the defecation acts as a steward, using his records to report to the public, the revenues and expenditure made by the government during an accounting period.  For this purpose, the statement of sources and application of funds analyses the financial position of the society and the income and expenditure accounts measures the success and (or) failure of the operation of the government.

Finally, the Accountants general of the Federal helps to pilot the affairs of the society.

His figures are important in planning future operations via the budget, in making decisions between alternatives, in allocating scarce resources to the numerous states and local governments within a the nation and in controlling expenditure votes by reporting on events soon after they have taken place and company them with the budget or plan.

In summary, the task of the accountant is to look back at the past, to record into the future and assist economic planners with decision making and control.  Both aspects of this task require figures to be assembled in statements that are easily assimilated, interpreted and used in the evaluation of performance by both accountants and non-accountants.


Many different types of people use accounting information each types requiring slightly different information from the basic   financial data produced by the accountant.

The accountant MUST therefore design his reports in such a way that the appropriate information is visible and understandable.  The users of accounting information include:

  • The management of the firm
  • Shareholders and potential shareholders
  • Employees and their trade Union Representatives
  • Creditors
  • Government agencies
  • Consumers and competitors
  • Tax payers
  • Church members
  • Finance manager of an international company
  • Members of a corporation’s board of directors.



Those are the most important users of accounting information.

An analysis of a past and expected future revenues and expenses will provide information, which is useful when plans are formulated, and decisions made.  Once the budget for a business is complete, the accountant can produce figures for what actually happens as the budget period unfiolds, so that they can be compared with the budget to measure achievement.  Management will need to know, in great detail and soon after the event the cost sequences of a particular course of action, so that steps can be taken to control the situation if things go wrong.  Spread and the ability to communicate and interpret are needed here.

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This group includes the investing public at large and the

stockbrokers, financial analysis and commentators who advice them.  The shareholders should be informed of the manner in which has used their funds, which have been invested in the business.  They are interested in the profitability and safety of their invested which helps them to appraise the company contemplating a take-over bid is yet another type of potential shareholders.  The accountant has an obligation to all those in this category to provide information on which they can depend when making their decisions, but the fact that some members of the group are more financially sophisticated than others cause difficulties, since the volume of information required by the financial analyst may confuse the ordinary shareholder.




        These use accounting information to asses the potential of the business.  It is relevant to the employee, who wishes to discover whether the company can offer him safe employment and promotion through growth over a period of years and to the trade unionist, who uses past profits and potential profits in his calculations and claims for higher wages or better conditions.  The viability of different divisions of a company is of interest to this group.

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