Why Is Accounting So Important?
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. The reasons for this are the same reasons that accounting is such an important aspect in the economy and in society.
Before we can begin to understand the importance of accounting, we first must understand what accounting is. 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. It is also responsible for identifying information on the transactions, analyzing it and then interpreting each and every document.
Now that we have begun to understand what accounting means we can begin to examine how important accounting really is. 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. These are just two of the many job positions found in any company that must have some knowledge of accounting. Another reason that accounting is important to all business majors is because of the fact that the business world has now come under much scrutiny. As a result they are held much more accountable for their financial practices. This has occurred because of the events of the Enron and WorldCom scandals. For this reason nearly all businesses require their employees to have a general knowledge of accounting.
Another way in which accounting is such an important aspect to any business is that accountants are responsible for providing information that is used to determine the present and future economic stability of the organization. It has been proven that these companies that use good accounting practices have a competitive advantage over their opponents. Also they have the ability to improve their decision making abilities. Those that do not use these practices face an inability to compete in the market and make their decisions simply on a hunch.
Not only is accounting very important in the business world it is also beneficial for ordinary people to know as well. Each and every person uses these accounting skills in their daily lives when making financial investment decisions. They also use it when assessing their interest rates in order to pay off their house mortgages. The final way in which they can use these skills is to balance their check books and to calculate the rates of their car payments.
Within the accounting department can be found the forensic accountants these are individuals who use the audit and investigative skills to assist in legal matters and to make recommendations in order to minimize future risks. Their jobs also can be extended into civil matters, for instance to find any hidden assets in certain divorce cases. These individuals are just as important as regular accountants because of the fact that they are also in very high demand. The reason though that their jobs are so important is because of the fact that fraud is becoming much easier to commit. These actions are a result of the fact that technology has increased significantly and that gives people individuals the ability to commit fraud on a massive scale and get away with it very easily.
The significance of accounting not only is clearly vital in the business world but it also can be shown that it plays a part on the individual scale as well. For these reasons and many more it can be shown that accounting clearly is if not close to the most important skill in todays’ society and will continue to be in the future.