Final answer:
Accounting is the process of recording, summarizing, and interpreting financial data, which is crucial for determining a company's financial position and for distinguishing between accounting profit and economic profit. The latter takes into account both explicit and implicit costs, while the former considers only explicit costs.
Step-by-step explanation:
The subject of accounting involves not just bookkeeping, but encompasses the full process of identifying, measuring, and communicating both economic and non-economic information to stakeholders. Statement I is incorrect as accounting typically focuses on economic information rather than non-economic information. It is crucial for aiding in informed decision-making. Statement II provides a more accurate albeit simplified perspective of what accounting entails, suggesting it includes bookkeeping, summarizing, and interpreting financial data.
These activities in accounting are particularly important for determining a company's financial position and performance, and they feed into the concepts of accounting profit and economic profit. Accounting profit refers to the net income reported on the financial statements, which is calculated as total revenue minus explicit, or out-of-pocket, costs. On the other hand, economic profit considers both explicit and implicit costs, the latter representing opportunity costs of a company's resources. The distinction between these two measures of profit is significant for assessing the true financial health and the long-term sustainability of a business.