Many people poke fun at accountants calling them "bean counters." While there is some truth in that statement, without accounting and accountants in the workplace, there would be no measurement of how well the business is doing. Accounting is the way a business keeps score of itself. Accounting is the process that records a company's financial transactions. It identifies, measures and communicates valuable information to a company's leaders to help them make informed decisions.
Accounting systems are a tool used by management to determine the financial status of a company. Accounting keeps track of income and expenses and helps the management team to make plans. One aspect of accounting is the budget process. Managers use budgeting to project income, expenses and staffing needs for company projects and growth. By using accounting, a company's leaders can plan appropriately for downturns in the economy or ready the company for growth.
Accounting measures the success or failure of a company. Public companies use their positive financial statements to encourage stock investors to buy stock. With an infusion of capital from stock purchases, a company can expand and grow to meet the increasing needs of its client base. Without accounting systems, the management team has no way of measuring a company's productivity.
The economic value of a company is assigned by the records and transactions that accountants keep. Company owners allow others, for a fee, to review the accounting records when they want to sell the company. The accounting records assign an economic value to the company based upon its financial activities: the income and expenses. Accounting also keeps track of the debts a company might have or the taxes it pays each year.
Tool for Change
Company leaders or managers use accounting reports as tools to make needed changes. When production or sales decrease in a specific area, accounting records reflect these decreases. This allows managers to make informed decisions that might include adding or reducing staff. If the product or service offered is no longer of value in the marketplace, the accounting records will reflect this and allow the company's leaders to use the information to make the needed changes. Accounting systems and records allow a company to be responsive to the changing marketplace.
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