I think we can agree that accountants are the people who carry out accounting, yet they cannot agree on its definition. They don’t know what accounting is. Some don’t know what it is not. Even non-accountants cannot agree.
I will not document and prove this outlandish statement; it would be far too boring. Instead I concentrate on the points that I find amusing, which I hope shows you how true it is.
One of the most contentious is art. Is accounting an art? One of the recognised references: the Oxford English Dictionary, even though they are non-accountants, believes that it is. According to them accounting is:
“the action, process, or art of keeping and verifying financial accounts.”
Accounting is the art of keeping financial records! Accountants are artists – I am an artist. I certainly didn’t expect that. I have been called many things but never an artist. However, several books and innumerable articles have been written with ‘art of accounting’ in the heading. But not only, you can find it in videos, conferences, podcasts, social media, names of companies and even in research papers, so I wonder why I am so surprised. A quick look on the web will confirm this.
Where did this insistence of accounting as an art come from?
The oldest I found, was a paper by James L. Dohr, in 1947:
“… accounting is a highly intricate art involving matters of economics, law, engineering, mathematics and other arts and sciences.” [1]
Now I did learn some economics and a smattering of tax and commercial law during my accounting education, but never engineering and no other arts or sciences. I think Dohr exaggerates in his declaration of accounting as an intricate art. Art never included economics, science and maths. But I must be wrong because the American Institute of Certified Public Accountants, AICPA begin their definition with the words, ‘Accounting is the art …’
Back in the early 1900s, George Lisle edited the eight volumes of Encyclopaedia of Accounting, in which one can read this emphatic statement, “Accounting is a branch of mathematics”. What a lowly branch of mathematics it must be. Accounting revels in addition, a smattering of subtraction with a pinch of multiplication and division, but not much more. I learnt these at school before qualifying. The only mathematical formula I did learn while studying for accounting was the one for discounted cash flow.
I am more a follower of John Duncan, a famous accountant, who stated in 1909:
“Accounting begins where bookkeeping ends, and is not an art, but a science.” [2]
But other accountants believe that accounting is a practice. The International Federation of Accountants, IFAC, for instance, propose a definition where accounting is not merely a ‘technical practice’, but also a social and moral practice. Moral and social elements bring us closer to art. This definition [3] brings accounting into the 21st Century, say the IFAC.
Why you might wonder have I chosen the IFAC as the example. They think that accountants need to re-define accounting. In a series of articles on their site they ask accountants to use their proposed definition. Accountants are not listening.
Other definitions use the different types of accounting and make a list: management accounting, financial accounting, cost accounting, forensic accounting to define it. This is like defining a table by its variations: coffee table, dinner table, bedside table, glass table, three legged table; an approach that doesn’t help.
Others cannot seem to accept the three words of the Oxford English Dictionary ‘keeping financial accounts’. They need more detail, more information and more explication to define what they do in their accounting profession, and they go into unimaginable detail. Here are two, the first in an article by Mary E. Barth in 2022 and the second from George Lisle again in 1907:
“…accounting is the process of creating information based on underlying economic activities with their shades of grey and the application of critical thinking and accounting judgments to generate decision-useful information.” [4]
“The science which treats of the methods of recording transactions entered into in connection with the production and exchange of wealth, and which shows their effect on its production, distribution and exchange.” [2]
Accounting as a science or a process comes up in these two definitions. But you will notice that ‘keeping financial accounts’ does not. Instead we have ‘recording of transactions’ and ‘creating information’, but nothing financial except for a global ‘connection with the exchange of wealth’.
So far accountants seem to think that accounting is an art, a science or a process. But non-accounting dictionaries state that accounting can be work, a theory, a system, a skill or a practice. I found two definitions by eminent accountants that called accounting a ‘service activity’ and an ‘information system’. Other famous accountants get away by omitting this ‘labelling’, with a phrase such as ‘accounting may be defined as …’ followed by a list of actions accountants might make, as in my table above.
You can see how confusing this gets. And then I found this by James L. Dohr, again, who wrote:
“… the man in the street has a highly oversimplified and utterly inadequate concept of accounting …” [1]
It would seem that accountants themselves have a highly complicated and utterly inadequate concept of accounting.
[1] An Introduction to the Art of Accounting, James L. Dohr, The Accounting Review, Vol. 22, No. 2 (Apr., 1947), pp. 151-161 (11 pages), Published By: American Accounting Association.
[2] As defined by George Lisle in the article by John C. Duncan, (1909) “Definition of Accounting,” Journal of Accountancy: Vol. 7: Iss. 4, Article 2. Available at: https://egrove.olemiss.edu/jofa/vol7/iss4/2 [3] “Accounting is a technical, social and moral practice concerned with the sustainable utilisation of resources and proper accountability to stakeholders to enable the flourishing of organisations,
