Accounting is frequently called the “ language of business”. Because of its ability to communicate financial information about an organization. Various interested parties, such as a manager, potential investors, creditors, and the government depend on a company’s accounting system to help them make informed financial decisions. An effective accounting system. Therefore, must include accurate collecting, recording, classifying, summarizing, interpreting, and reporting of information on the financial status of an organization.
In order to archive a standardized system., the accounting process follow accounting principle and rulers. Regardless of the type of business or the amount of money involved, common procedure for handling and presenting financial information are used. Incoming money (revenues) and outgoing money (expenditures) are carefully monitored, and transaction are summarized in financial statement which reflect the major financial activities of an organization.
Two common financial statements are the balance sheet and In the income statement. The balance sheet show the financial position of a company at one point in time. While the income statement shows the financial performance of a company over a period of time. Financial statement allow interested parties to compare are organization to another and/or to compare accounting period within one organization. For example, an investor may compare the most recent income statement of two corporation in order to find out which one would be a better investment.
People who specialist in the field of accounting are know as accounting . in the united state accountants are usually classified as public, private or governmental. Public accountant work independently and provide accounting services such as auditing and tax computation to companies and individuals. Public accountant may earn the title of CPA ( Certified Public Accountant) by fulfilling rigorous requirement. Private account work solely for private companies or corporation that hire them to maintain financial records and government accounts work for government are paid on a salary basis. Whereas public accountants receive fees for their services.
Through effective application of commonly accepted accounting system private, public, and governmental accountant provide accurate and timely financial information that is necessary for organizational design making.