1.1 The role of accounting in business and society

Accounting is the language of business and we may not realise it but we use accounting daily in our personal lives. Businesses affect almost every aspect of our lives. Think for a moment about your usual everyday activities. How many businesses did you directly encounter just today? Suppose you started your day by purchasing a cup of coffee at your favourite cafe. This purchase you made involves accounting for both you (as a consumer) and the cafe (as a business). You exchange money via cash, debit or credit, in exchange for a desired product and the business receives the cash and provides the product (a yummy hot beverage) to the customer, i.e. you!

While an everyday consumer of products and services may not record every purchase they make, a business records each transaction using double entry accounting, which you will learn more about in Chapter 2, but simply put double entry accounting requires the business to record two items that has taken place – for example a sale (impacting the revenue account) and cash received (cash account) – in the accounting system.