IMPORTANCE OF ACCOUNTING

Importance of Accounting

Importance of Accounting

Introduction

The significance of accounting has never been more apparent than in today's market, with the struggling economy and the job market in decline.  Though the loss of jobs may be happening in many fields the one that continues to stay strong is accounting (Alan, 2007, 1-2).  The reasons for this are the same reasons that accounting is such an important aspect in the economy and in society.

Accounting

Accounting can be defined as the theory and system of setting up, maintaining, and auditing the books of a firm.  It is the art of analyzing the financial position of a business through its sales, purchases, and overhead.  These records must be kept in chronological order and must be summarized in a useful format (Alan, 2007, 1-2).   It is also responsible for identifying information on the transactions, analyzing it and then interpreting each and every document. According to American accounting association, accounting has been defined as, “The process of identifying, measuring, and communicating information to permit judgment and decision by the users.” (Carruthers, 2005) Yet another definition of American Institute of Certified Public Accountants (AICPA) is that “Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character and interpreting the results thereof.” (Elliot Jamie 2004)

Accounting entails recording, classifying and summarizing of business transactions. It is a process of identification, measurement and communication of economic information involving four interconnected phases (Carruthers, 2005). They are outlined herein: At the outset, the first phase is meant to record the economic events or transactions -depending upon their occurrences, chronologically in the books of accounts - called journals. This process is known as journalizing. Next comes the phase of ledger-posting: It is the process by which all the transactions are synthesized account-wise so that the accumulated balance of each of those accounts can be determined. The process of ledger posting is vitally important as it helps in ascertaining the net effect of various transactions during a given period. The subsequent stage is preparing the trial balance which involves the arrangement of all ledger accounts having been aggregated into debit and credit balances. This activity enables to check and confirm whether the total of debits is equal to that of credits. Finally, comes the phase of preparing financial statements. This phase is meant for finalization of accounts by measuring profit & loss account and preparing Balance Sheet- at the end of accounting period. (Goodyear 2009)

Importance of accounting

Accounting and career

The first way in which it is important is that an accounting education can be applied to any job industry.  For instance a secretary uses accounting in managing a company's check book.  Also the executives of this same company must be able to analyze the success of their business through analyzing the accounting statements from the past and present (Elliot, 2004).  These are just two of the many job positions found in any company that ...