The concept or idea of financial accounting is so wide that every scholar accountant has a definition for it. My mentor often has ideas that accounting is a ritual, a language, a cultist and a state of mind.
So, when in delved deeper into his ideas, I found out that accounting can also be referred to as a ritual, a language, a cultist and a state of mind. Although, these are metaphoric words; it doesn’t means accountants are involved in any secret society.
The Concepts of Financial Accounting
1. Accounting is a Ritual
Interpreting accounting as a ritual comes from the perspective that they both share similar structured nature processing. Like rituals, accounting involves a set of established practices or rules, often carried out in a routine manner with a focus on achieving informed decision about financial state or economic state of a business.
Some typical examples that backed the idea of accounting being like a ritual are consistency, regularity and complying to established rules. Both terms have tasks that are performed on recurring basis. An accountant usually perform reports per annum, quarterly or per month.
Speaking of complying to established rules, like rituals, accounting follows strict guidelines, such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS).
The GAAP is basically used in the United States. All certified accountants in the country should be able to understand and analyze financial reporting drafted using GAAP. However, this system cannot be used in another country; IFRS is a system adopted by many countries of the world.
Both financial accounting reporting systems have established rules and practices which accountants follow to be able to understand the financial information or economic information in the report, making it looks like it’s adopting ritual doctrine.
Furthermore, symbolism and meaning also emphasized the similarity between ritual and accounting. Every financial entry or calculation in accounting represents a piece of the larger financial picture. Similarly in ritual, every action has a significant symbol and meaning.
2. Accounting is a Language
Aside the fact that accounting has terminologies, it’s also a universal way to communicate financial information. Just like any other language, accounting has its own rules, symbols, and structure that allow people to understand and interpret financial data and information.
Financial accounting information such as how money is earned, spent, and managed are usually being communicated through balance sheets, income statements, and cash flow statements.
Furthermore, accounting has its own “language” in the form of International Financial Reporting Standards (IFRS). This system ensure that financial or economic information is recorded and presented in a consistent manner, giving it a universal recognition in the sense that those who are trained to become a qualified and certified accountant can "read" the financial statements of any company, much like how people who speak the same language can understand one another.
3. Accounting is a Cultist
The word “cultist” metaphorically and practically describes how rigid, highly disciplined and adherent to specific practices and beliefs the field of accounting can be. Accounting operates under strict principles, much like a belief system with rigid guidelines.
Accountants are trained to follow standard practices, such as IFRS, which dictate how transactions are recorded and reported. This can make the profession seem like it adheres to "rituals" or a fixed code of conduct that must be followed with precision, similarly to cultist practices.
Furthermore, Accountants often form tight-knit professional communities e.g Institute of Chartered Accountants of Nigeria (ICAN), bound by a shared commitment to their work and ethical standards. This strong professional identity could be seen as cult-like, as practitioners may view their role in society as vital and are deeply invested in maintaining the integrity of their craft.
4. Accounting is a State of Mind
Yes, Accounting is a state of mind! Accounting can be seen as a state of mind because it fundamentally shapes how you view and interact with the world, especially in terms of numbers, resources, and decision-making.
When you adopt an accounting mindset, you begin to think in terms of balancing costs and benefits, tracking resources, and assessing the value of actions. It’s not just about recording transactions; it’s about understanding the flow of value—whether it’s money, time, or effort—and making decisions based on that understanding.
You develop a habit of weighing risk, prioritizing efficiency, and always considering the broader impact of financial choices, whether in personal finances or in business operations.
This mindset gives a discipline of objectivity, where emotions take a backseat to logic and clarity. Accountants are trained to be detail-oriented and cautious, always looking for accuracy and consistency.
Over time, this can influence how you approach problems, making you more analytical and methodical in solving them. In essence, accounting becomes more than a profession—it becomes a way of thinking where you constantly evaluate and measure value, helping you see opportunities and risks in a structured, informed way.
History and Definition of Accounting
Accounting can be defined as the process of identifying, classifying, summarizing, analyzing and recording of financial information or economic information to permit an informed decision by the use of the information.
It is the process of recording financial information or economic information pertaining to a business. The accounting process includes summarizing, analyzing, and reporting the information to oversight agencies, regulators, and tax collection entities.
The history of accounting has been around almost as long as money itself. Accounting history dates back to ancient civilizations in Mesopotamia, Egypt, and Babylon. For example, during the Roman Empire, the government had detailed records of its finances. However, modern accounting as a profession has only been around since the early 19th century.
Luca Pacioli is considered "The Father of Accounting and Bookkeeping" due to his contributions to the development of accounting as a profession. An Italian mathematician and friend of Leonardo da Vinci, Pacioli published a book on the double-entry system of bookkeeping in 1494.
By 1880, the modern profession of accounting was fully formed and recognized by the Institute of Chartered Accountants in England and Wales.
