Accounting serves as the interpreter among different tongues in the corporate world.
Before accounting was widely used in a professional setting, it first served the homes of every individual. Basic accounting allows us to keep track of our daily expenses and budget our savings.
In school, accounting is not only a subject we need to pass to graduate, but we also use this practice to budget our money for food, materials for projects and for other expenses. But for businesses, accounting is much more than that. This practice is one among many keys vital to running a company and maintaining good profit.
Accounting or accountancy is the measurement, processing and communication of financial information about economic entities such as businesses and corporations.
In 1494, Luca Pacioli, an Italian mathematician, established the modern field of accountancy. This practice is sometimes referred to as the “language of business”. It measures the results of an organisation’s economic activities. It also relays this information to a variety of users, including investors, creditors, management, and regulators. Professionals of this field are known as accountants; while the terms ‘accounting’ and ‘financial reporting’ are often used as synonyms.
The work divides into several fields including financial accountancy, management accountancy, external auditing, and tax accountancy.
Information systems support accounting functions and related activities. This may either be actual people interpreting the work or a computer-based program.
Financial accountancy focuses on the reporting of an organisation’s finances. This includes preparing financial statements to be sent to external users such as the investors, regulators and suppliers.
Management accountancy then serves to advise the company in their economic engagements. By analysing reports and looking at trends, this practice can help predict a company’s future outcome. The task of management accountants is to help the enterprises by giving good advice to move the company towards success.
Another term associated with the practice is bookkeeping. This practice records financial transactions so that summaries of the accounts round up in financial reports. Double-entry bookkeeping is the most common system used to show the equal and opposite effects of such transactions.