In a nutshell, accounting is the systematic recording of financial transactions. Accounts are created and explained by accounting professionals. They must be detail-oriented and logical. While math skills are still important, these skills have diminished in importance with the widespread availability of calculators and computers. However, the need for good attention to detail cannot be denied. This article will help you learn more about the career of an accountant. So, what is accounting? And what are the important characteristics of an accountant?
Accounting is the systematic recordation of financial transactions
In short, accounting is the process of recording and reporting all financial transactions. The accounting process helps organizations understand their financial performance and makes statistics available to help managers make informed decisions. Essentially, it aims to answer four questions: what do we own? Who else has a claim on it? Where did all the money come from? What are the differences between visit us these four questions? And how do they apply to different types of businesses?
It is a process
The accounting process consists of a series of steps that are followed by a business entity to record, classify, summarize, and report financial transactions. The purpose of these steps is to prepare financial statements that show the profits and losses of a business. These accounts are necessary for communicating the results of the business operations to various users, such as owners, creditors, and managers. These individuals need accurate information about a company’s financial condition to make informed decisions.
It involves double-entry bookkeeping
You’ve probably heard of double-entry bookkeeping, but do you know how it works? To understand what double-entry bookkeeping is, consider a scenario: Alpha Company buys $5,000 worth of furniture. This money will be paid in cash. In order to report the purchase, Alpha must make a debit entry in one of its asset accounts and a credit entry in its cash account. This transaction reduces the balance in Cash and increases the balance in another account. The debit amount equals the credit amount.
It is governed by GAAP
GAAP is a standard for reporting financial information in the United States. Companies that issue stock must comply with the standards set by the Securities and Exchange Commission. These standards require that companies have external audits by independent accountants every year. Companies that do not issue stock do not need to comply with the standards. The financial reporting standards are overseen by the Financial Accounting Standards Board (FASB).
It is a key function for almost any business
The accounting function is a vital part of any company and helps create a fiscal history of a business. Accountants keep track of business expenses and incomes to help predict future financial success. The data gained from accounting is used to develop budgets and to identify new growth opportunities. It also helps record business transactions and provide updated financial information for internal and external stakeholders. This article describes the various roles and responsibilities of an accountant.