Accounting is the scientific process of collecting, recording, classifying, managing, monitoring, and communicating financial information about the financial aspects of non-financial corporate entities like businesses and corporations. It includes a systematic evaluation of financial transactions and activities in a company to give a fair market value to the assets and liabilities of the organization. It also involves preventive measures for the protection of the assets and interests of the business. Business enterprises can benefit from the benefits of accounting by effectively using financial transactions and systems to optimize the performance of their business.
There are two main forms of accounting, however, the terms may be used interchangeably because they all refer to the same thing. The basic difference between the two is in the methods used to record financial transactions. One form is cost accounting, which applies mainly to small businesses. The other form of accounting is managerial accounting, which applies to large businesses. Cost accounting usually involves the use of manual methods to record financial transactions while managerial accounting relies on computerized systems to properly document the financial transactions of the business.
The major role that accountants play in any enterprise is to create and maintain the financial records. In large organizations, accountants are in charge of collecting and organizing information from various resources and then putting this information into a format that can be accessed by the managers. They then use this information to make decisions regarding the business and make recommendations on how to best increase profitability and at the same time cut costs. Since there are various kinds of accounting systems that each employ different means of data capture, accountants must also be trained on how to conduct their respective functions.
To become an accountant, one has to undergo formal education in business accounting. The education that accountants undergo usually covers the theories of economics and accounting. The coursework typically includes classes in taxation, management theory, statistics, ethics, management practice, law, portfolio management, accounting theory, accounting terminology, financial reporting, business analysis, decision making, business planning and bookkeeping. There are also courses on auditing, regulatory laws, ethics and banking, which are also taken by would-be accountants.
One of the major fields that accountants specialize in is cost accounting, since this involves the decision-making process as well as the documentation of that decision-making. As part of the course, students will learn how to handle financial statements, work within a budget, calculate errors, fix mistakes and make necessary changes. In order to be good cost accountants, individuals who want to become managers or business managers should also take classes such as interpersonal communication, leadership, decision-making, supervision and problem solving.
Cost accountants must also learn the concepts on the preparation of the balance sheet (which includes the income statement, the cash flow statement and the balance sheet), and the preparation of the financial statement (which includes the income statement, balance sheet, and the financial metrics report). These concepts are extremely complex and are not taught during the initial coursework. A good accountant must be able to analyze financial statements, financial trends, investment and financing plans, the impact of federal, state, and local taxation on the business, and how these relate to the business’s goals and objectives. A successful accountant will be able to interpret and communicate the information from the balance sheet, income statement, cash flow statement, and the financial ratios (which include the gross profit, sales, net income, operating profit margin, and the earnings per share).