Review the answer

You review the answers , and you are to provide the critical and constructive feedback.

In providing feedback, you should consider the following:

1. How effective was the writer's use of language?
2. How clearly does the author express his or her ideas?
3. Is the response clearly written, well-structured, and logically consistent?

Question: Informally, accounting can be described as "storytelling with data". Consider the following two alternative, more formal definitions of accounting:

1. "Accounting is the process of capturing, recording the details of financial transactions and activities of an entity for the purpose of producing financial statements."
2. "Accounting is the process of identifying, interpreting, and measuring economic events and activities of an entity for the purpose of reporting to users for decision-making purposes."

Which of the above definitions best reflects, the "data" that is the basis for accounting, and how accounting is "storytelling"? Justify your choice.

Answer:

In my opinion, "Accounting is the process of identifying, interpreting, and measuring economic events and activities of an entity for the purpose of reporting to users for decision-making purposes." is the best definition for accounting and relates to its "storytelling" nature. Accounting process records data from the economic activities of an entity. However, the purpose of accounting is not recording and creating financial statements but transforming data into information and helping users to interpret information as well as to make decisions.

"The process of identifying, measuring and communicating economic information about an entity for decision making by a variety of users" (Birt et al., 2012, p.5). This definition listed on our slides basically explained the same idea about accounting with the second definition. The dataset from economic events can be seen as the main resources or the input of accounting. Accountants first identify useful data and record them, then the process will be transforming these data into information which allows users to interpret how the business performs and analyze how to help their business performs better. Accountants cannot produce information if they do not have adequate and reliable data. I think the second definition perfectly described what accounting is and reflects the "data" is the basis of accounting. Accounting tells a story about economic events to owners and investors of an entity. It only provides information from data, the information contains revenue, profit, expense, inventory and etc. The information just like a tool that helps users to make decisions.

I do not agree with the first definition as it supported that the purpose of accounting is producing financial statements. Producing financial statements is the process when accounting transform data into information, the statements are served for decision-making.

By analyzing the two definitions, I think the second one best reflects the "data" that is the basis for accounting, and how accounting is "storytelling".