1.1 Accounting and Accounting Profession

Accounting is an information system designed to identify, record, and reflect economic activities and events about an enterprise with monetary unit as its main criterion.

Identifying means to distinguish which activities are related to a firm's objectives. Only those relevant economic activities need to be recorded, classified,and summarized by the accountant. Recording means to keep a systematic,chronological dairy of economic activities, and events measured in dollars.Reflecting means to provide timely and accurate information about a firm's financial condition and operating performance to its external and internal users by means of financial reports. A vital element in reflection is the accountant's ability to analyze and interpret the reported information, and it involves the application of ratios, percentages, graphs, and charts to emphasize significant trends of economic activities and their relationships.

It is important to note that accounting involves bookkeeping function, while the bookkeeping only involves the recording of economic activities and events as it is just one part of the whole accounting process. Accounting is also an information system which provides necessary information to the management, shareholders, creditors, and other stakeholders of the enterprise. The primary objective of stakeholder accounting is to provide useful information to decision makers.

accounting [ə'kɑʊntɪŋ] 会计，会计学

accountant [ə'kɑʊnt（ə）nt] 会计人员，会计师

stakeholder [ˈsteɪkhəʊldə（r）] 利益相关者

1.1.1 Ethics

The goal of accounting is to provide useful information for decision making. Information to be useful should be worthy of trust. So, the effectiveness of financial reporting depends on sound ethical behavior. Ethic is an ideological standard by ethic which one's conducts are judged as right or wrong, honest or dishonest, and fair or not fair.

When analyzing economic activities involving ethics, it is helpful for accountants to follow the following three steps. First, accountants should recognize the ethical situation and the involved ethical issues. That means to use the accountants’ personal ethics to identify ethical situation and its related ethical issues. Some professional organizations also provide written codes of ethics for guidance in this kind of business situations. Both Accounting Law of the People's Republic of China and the Accounting standards specify the contents and requirements of accounting professional ethics. Second, accountants need to identify and analyze the principal elements in the ethical situation in order to figure out who or which group may be harmed by or benefited from this situation, and which party should take the responsibility and obligation. Third and the last,accountants need to identify the alternatives, and to assess the impact of each alternative to its stakeholders. This step requires accountants to select the most ethical alternative after considering all the possible consequences. Sometimes there will be only one solution, but sometimes there will be more than one solution.Under this circumstance, there will be a need of evaluation and selection of the best one.

ethic['eθɪk] 道德

1.1.2 Accounting Function

The accounting function refers to the objective functions of the accounting during operation and management. To correctly understand the accounting function is of great significance to the putting forward tasks of accounting work, to the determination of accounting personnel's responsibility and authorities, and to the full exertion of accounting roles.

Calculation function, which is one of the basic functions of accounting, runs through the whole process of economic activities. Under this function, by using the monetary form and certain methods or procedures, accounting records the economic activities, and then makes the necessary calculation, sorting, processing,and summarizing so as to put data into a series of information that could reflect accounting objects, and summarize producing and operating activities and their results.

Supervision function is also known as control function. It means to examine the authenticity, legality, and rationality of economic businesses of a specific accounting subject when the accounting personnel carry out the calculation function. Just as calculation function, it is one of the basic functions of accounting,and is also an important component of Chinese economic supervision system.

In addition, accounting functions also include prediction, decision making,analysis, and so on.

1.1.3 Accounting Information Users

What kind of information should accounting provide? It depends on who will use accounting information. There are two broad types of financial information users: internal users and external users.

Internal users of accounting information are the users who are inside an enterprise and plan, organize, manage its business, such as board of directors, Chief Executive Officer （CEO）, Chief Financial Officer （CFO）, and so on. By reading and analyzing the detailed information about the company's financial position and financial performance, these internal users could make their own decisions about operating, financing, and investing.

External users of accounting information are the users who are outside the enterprise, such as shareholders （investors）, creditors （lenders）, tax offices, external （independent） auditors, labor unions, and so on. Among them, the first two are the most common types of external users. Shareholders （investors） refer to those who engage in investment activities in the capital market. As the owner of one corporation, shareholders rely on accounting information to decide whether to buy in, hold on, or sell out shares or stocks. Creditors （lenders） are individuals or organizations that the enterprise owes money or other resources to. Creditors need to use accounting information to evaluate risks of granting business credit or lending money to the enterprise and to decide whether to provide purchase on credit or lend money to it.

Different external users need different kinds of information. For example, tax authorities which have the right to levy need accounting information about whether the company paid taxes according to the law and how much taxes it should pay, while potential investors follow accounting information of a company's profitability and sustainability.

shareholders（investors） ['ʃeəhəʊldə] [ɪn'vestə]）股东（投资者）

creditors （lenders） ['kredɪtə]（['lendə]）债权人（借款人）

profitability [ˌprɑfɪtə'bɪləti] 获利能力

substantiality [səbˌstænʃɪ'æləti] 可持续发展能力

1.1.4 Accounting Profession

The accounting profession can be divided into three broad categories: public accounting, private accounting, and accounting for government and nonprofit organizations.

Public accounting provides accounting services to the public on a compensable foundation base. In field of public accounting, the accountant can provide service either as an individual or as a member of accounting firms. Most of the accountants working in public accounting firms are qualified as a Certified Public Accountant （CPA）. Thus, public accounting firms are also called CPA firms, and they could provide services like auditing, tax agency, management advisory and authentication.

Private accounting is one of the core functions of business. According to the subject and purpose of service, modern accounting can be divided into two main branches: financial accounting and management accounting. Financial accounting is concerned with providing accounting information to shareholders,creditors, and other information users. Based on generally accepted accounting principles （GAAP）, it measures and records business transactions and prepares financial statements to convey information. By measuring, analyzing, and reporting financial and non-financial information, management accounting could help managers to choose, communicate, and implement appropriate strategies, and then help the company fulfill its development targets.

Accounting for government and nonprofit organizations mainly provides accounting service to government and nonprofit organizations. It has two major activities. One is to check and supervise the implementation of budget for each level of the government and all the non-profit organizations. Another is to identify,measure and report all the financial incomes and expenditures of government and nonprofit organizations as well as the corresponding result. Accordingly, accounting for government and nonprofit organizations is usually engaged in activities like budget management, administration management, social service, and etc.