Accounting or accountancy refers to the measurement, interpretation, and reporting of financial and other non-financial data about specific organizations including corporations and businesses. The objective of accountants is to maximize the efficiency of the financial transactions and to record all significant events that occur in the financial reporting process. Accountants are also involved in the identification, measurement, and reporting of risks in the financial statements. Most of the activities of accountants are performed at the national level and most accountants work with local governments in maintaining the tax status of individuals and businesses. Most accountants also offer their services in the international arena.
Accounting has four main methods: managerial accounting, project accounting, information systems accounting, and resource accounting. Managerial accounting is a form of accounting that focuses on the process by which an individual or a team of people make business decisions. Project accounting is an example of managerial accounting that concentrates on the collection and evaluation of information relevant to a project. Information systems accounting is an example of a form of managerial accounting that provides decision makers with financial tools that are applicable to their needs. In general, though, all three forms of accounting are used for the same purpose, which is to provide decision makers with useful information relevant to the performance of a company.
Accounting has been criticized over the years for its concentration on the management of resources rather than its other more important function, which are to make informed decisions based on financial accounting principles. The focus on managerial accounting makes it difficult for many business owners to obtain necessary information when making important business decisions. On the other hand, the idea of managerial accounting itself provides a rational framework through which information can be collected so that managers can make informed decisions.
Although most of the basic accounting activities are the same throughout most companies, the method of using accounting software differs among them. Many companies still use bookkeeping, which is the combination of cost accounting and managerial accounting. Other companies have chosen to use different methods, such as internal control or third-party auditing. It is important to determine what method is best suited for the type of accounting being performed before making a final decision.
There are four major accepted accounting principles. First, all transactions in a business must be related to and accurate within the context of the entire organization. Second, information must be submitted in a timely manner to comply with the requirements of the law. Third, management must ensure that the results of its accounting practices comply with the principles set forth in the Financial Accounting Standards Act (FASA).
Learning the various accounting terminology is an integral part of learning to be an effective manager in any business environment. In order to properly communicate with others about the principles underlying the accounting transactions, students must possess a solid foundation in accounting principles. Learning to properly calculate and interpret accounting data will not only help students to perform better, but will also help them present their ideas in an understandable manner. It is very important for accounting majors to be aware of and familiar with accounting terminology, as this knowledge will help them in their future careers. The accounting terminology is used throughout the world by accountants, auditors, lenders, business owners, government agencies, and shareholders to interact with each other.
