We have all heard about accounting, but have you ever wondered why is accounting important? Here we give you the reasons of why is accounting so important not only for a business but also in our day-to-day lives. Read on…
With the kind of economic situation and the job market we are living in, the importance of accounting has become highly significant. All round us, with each passing day, we hear of job loss, but accounting is one sector which is still going strong and will continue to create jobs.
But before we go in to the depths of why is accounting important, let’s take a look at what is accounting. Accounting is a system wherein the financial books of an organization are set up, maintained and audited. It’s an art wherein the financial position of a company is analyzed by taking into consideration the sales, cost of things purchased and costs of overheads.
The records are maintained in a chronological order and is summarized in a particular format. You may also like to know about internal controls in accounting, so that you know the checks and balances which organizations follow.
Why is Accounting Important to a Business
Once you have got an idea of the purpose of accounting, you will get a clear idea of the importance of accounting. The most important part of an educational degree in accounting is that the theories once learned can be applied in any industry.
For example, a secretary in a company uses theories learned in accounts to manage the check book of a company. Moreover, the top management of the same company should be capable of analyzing the success rate of a business by going through the past and present account statements. You should also try and learn equity method of accounting, so that you understand what is accounting all about.
Another important reason for the importance of accounting is due to the fact that there is a lot of scrutiny of the financial statements of a company, thereby resulting in financial accountability to those people holding positions of financial importance. If you are interested, you can read the bachelor’s degree in accounting, so that you know the advantages of pursuing such a degree.
From an organization’s point of view, it is the accounts department which provides information relating to the current and future economic condition of the organization. Moreover, decision-making, regarding the present and future projects, becomes easy and therefore proper accounting is of utmost importance. Organizations which use standard accounting practices are better placed as compared to their competitors because knowing their financial position they are ready to seize an opportunity in the market.
Why is Accounting Important in Society
Accounting is not only important in the field of business, but is also necessary in the day-to-day lives of the common man as well. Every day people use accounting skills while making decisions related to finance and investment options. Moreover, accounting skills are also used while making an assessment of the interest rates which are needed to pay off a loan.
Within the field of accounting, there is another section called forensic accounts wherein individuals use investigative and audit skills to help in legal matters, besides making recommendations so as to minimize risks in the future. This type of accounting jobs can also be extended into matters related to civil issues like finding out if there is any hidden assets in some divorce cases.
People working in such cases are equally in demand as those working in the accounts department of companies. The main reason for this is that, there are several instances of fraud and people are increasingly finding out new ways of committing financial crimes. You can also learn about forensic accounting careers, so that you know this field better.
So accounting is significant not only from the point of view of jobs in the corporate field, but also in our day-to-day lives. People responsible for keeping the accounts of a company should look after all matters related to the finances of a company be it profit, loss or the amount an organization has to pay in taxes.
These reasons make accounting one of the most important skills which an individual should try and acquire in his or life. Hope, this information on why is accounting important answered your query on the relevance of accounting in the day-to-day financial decisions.