Business accounting consists of three basic activities: identifying, recording and communicating the economic events of a company. It is important, because it allows for the analysis of income and expenses, which gives an overall picture of the business's financial health.
Business accounting is different from bookkeeping, which is more focused on recording business activity and producing documentation of transactions. Business accountants manage and produce financial statements, pay taxes for the company, and oversee all necessary financial reporting. Most companies either keep their business accounting functions internal or outsource them to accounting firms.
Business or corporate accounting is different from public accounting. The bulk of public accountant work in big firms is auditing, which is confirming the accuracy and validity of financial records. Corporate accountants work in the accounting department of a business. They handle day-to-day accounting tasks such as balancing the books, tracking expenses and revenue, executing payroll and paying the bills. They also prepare financial statements to comply with government regulations.
The Role of Accounting
Accounting is often called “the language of business.” Why? Because it communicates so much of the information that owners, managers, and investors need to evaluate a company’s financial performance. These people are all stakeholders in the business, which is to say they’re interested in its activities because they’re affected by them.
In fact, the purpose of accounting is to help stakeholders make better business decisions by providing them with financial information. Obviously, you wouldn’t try to run an organization or make investment decisions without accurate and timely financial information, and it’s the accountant who prepares this information. Simply saying, the role of accounting in business is to help internal and external stakeholders make better business decisions by providing them with financial information.
Fields of Accounting
Accountants typically work in one of two major fields. Management accountants provide information and analysis to decision makers inside the organization in order to help them run it. Financial accountants furnish information to individuals and groups both inside and outside the organization in order to help them assess its financial performance. In other words, management accounting helps you keep your business running while financial accounting tells you how well you’re running it.
1. Management Accounting
Management accounting plays a key role in helping managers carry out their responsibilities. Reports are tailored to the needs of individual managers, and the purpose of such reports is to supply relevant, accurate, timely information in a format that will aid managers in making decisions. In preparing, analyzing, and communicating such information, accountants work with individuals from all the functional areas of the organization—human resources, operations, marketing, and finance.
2. Financial Accounting
Financial accounting furnishes information to individuals and groups both inside and outside the organization to help them assess the firm’s financial performance. These financial reports—including the income statement, the balance sheet, and the statement of cash flows—summarize a company’s past performance and evaluate its financial health.
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