Accounting Explained With Brief History and Modern Job Requirements

Business owners who don’t have the time or money to keep accounting in-house may also outsource accounting services to external firms. These firms also use accounting software (whether popular software from providers define accounting like QuickBooks or proprietary in-house software solutions) to track and analyze your company’s finances. Tax accounting refers to recording and reporting financial information that relates to your business taxes.

Accountants calculate ROI by dividing the net profit of an investment by its cost, then multiplying by 100 to generate a percentage. For example, consider a person who invests $10,000 in a company’s stock, then sells that stock for $12,000. When an investor incurs a loss, the ROI is expressed as a negative number. To obtain CPA licensure, a candidate must meet eligibility criteria and pass a demanding four-part standardized exam. Eligibility standards include at least 150 hours of higher education covering related coursework. Some students enter accounting programs with little technical knowledge — and that is OK.

Concerned with transactions and events having financial character

As such, owners cannot be held personally liable for debts incurred solely by the company. As used in accounting, inventory describes assets that a company intends to liquidate through sales operations. It includes assets being held for sale, those in the process of being made, and the materials used to make them. It is a more complete and accurate alternative to single-entry accounting, which records transactions only once. Depreciation (DEPR) applies to a class of assets known as fixed assets.

It is concerned with the interpretation of accounting information to guide the management for future planning, decision-making, control, etc. Management accounting, therefore, serves the information needs of the insiders, e.g., owners, managers and employees. As per Robert N. Anthony, “Accounting system is a means of collecting, summarizing, analyzing and reporting, in monetary terms, information about the business”. In short, we can say that accounting is the language of business by which all the financial and other information are communicated to various interested parties. The basic objective of accounting is to provide the desired information to the owner as well as to all other interested parties i.e. investors, creditors, employees, financial institutions, government etc.

In-house accountants

The focus of financial accounting is to measure the performance of a business as accurately as possible. While financial statements are for external use, they may also be for internal management use to help make decisions. The accounting process provides financial data for a broad range of individuals whose objectives in studying the data vary widely. Bank officials, for example, may study a company’s financial statements to evaluate the company’s ability to repay a loan. Prospective investors may compare accounting data from several companies to decide which company represents the best investment.