Accounting - the backbone of business

There’s no questioning the importance of accountants in business. Without accounting, businesses would not be able to function and grow and would encounter serious time restraints when doing financial work.

History

The profession of accounting was actually developed in the middle ages, for the purpose of dealing with the growing demand of new developers and traders. The first ever records of accounting being used dates back to 1494 in Venice, Italy, and unsurprisingly, the records were made by a monk. While the processes for making and recording accounting transactions have obviously changed in the 520 or so years since then, the basic concepts of income, liabilities, assets, and reconciliation has remained fairly unchanged.

Accounting Today

These days, accountants have the benefits of technology to help them with their tasks. Computers and software allow repetitive and complex bookkeeping tasks to be streamlined, while governmental processes allow for a common and established protocol. Accountants, then, are free to use a bit of well-informed creativity in their methods, meaning that their skill is ever improving and reflecting positively on the health and success of our businesses.

Two Basic Categories of Accounting

  1. Managerial accounting refers to dealing with information such as a business’s salary expenses, costs of goods or services produced, profit goals and material control information. The information garnered from this type of accounting is used by owners, managers, and supervisors in order to help them formulate good operational decisions and is not generally information that is released to the public.
  2. Financial accounting, on the other hand, involves dealing with information that is made available to the public, such as creditors, customers, regulatory commissions, stockholders, and suppliers. All of these aspects would be quite difficult to handle by owners or managers alone (assuming they themselves don’t have accounting expertise) and there would likely be a lot of room for error and fraudulent decisions if management were allowed to handle the accounting side of things.

The word ‘accountability’ stems from the Latin word (accomptare) that gave accounting its etymology and accounting in specialized cases does just that. Income tax and auditing force businesses to account for their transactions and eliminate the ability to commit fraud. Having said that, this only applies if the accountant themselves is honest.

As you can see, accounting is the heart of business finance and trade would collapse without it. Whether you’d like a career in accounting or would like to complete a course to use your skills within your own business, accounting is a worthy specialty to have.

The CFS Team
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