A new definition of accounting.

It has been a while since my last post, busy times. I hope to be able to get back to more regular posting now.

When I teach accounting to students for the first time, I typically draw on definitions which used words like “economic” and “communication”. Such definitions are of course a bit dated, and I typically provide more current insights on what accounting actually is, bringing in accounting for non-financial items and accounting for resources. I am always keen to emphasise the communicative element of accounting – it is after all data, transposed to information, and information is of less value if not communicated.

Recently Carnegie et al. (2021) published a really great commentary on what accounting is. As well as giving some very useful historic background, they provide a definition of accounting as follows:

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, people and nature.

Hats off, I cannot argue with the above, it captures what accounting is, or perhaps should be. I have been lucky enough to hear Gary Carnegie speak about the above definition, and he really presents a great case. The paper also poses the definition as something for debate and future work.

For what it is worth, my contribution to the debate is a simple one. The definition is fine, but let us not forget the word communicate and/or communication. Decisions in business can only be made on the basis of information, which should imply communication. Thus, perhaps as part of the operationalisation of the above definition, some notes or comments could re-affirm that communicate/communication is a must for accounting. It could of course be argued that “accountability” in the above definition implies communication. However, as a management accountant I can recall times from industry when communication could have led to accountability. A chicken and egg point perhaps, so let me put it another way. Accounting is a (not the) language of business, and while languages and meaning of words evolve (like accounting), they die out if not used to communicate.

Thanks to Garry Carnegie, Lee Parker and Eva Tsahuridu for kicking off what is an interesting and worthy debate.