An Introduction to Accounting
Many people think of accounting as a back office function, a necessity that businesses simply cannot avoid. The reality is that accounting information is the lifeblood of all business management decisions. Without accountants, various stakeholders would not be able to assess the financial condition of a business. Managers would have no basis for the constant choices they confront. They would not be able to evaluate past events or current policies. Organizations would be unable to comply with taxation regulations. This crucial business function is quite broad and offers many exciting career opportunities.
What exactly is accounting?
When using the term “accounting,” persons outside the informed business context are primarily referencing the specific area of Financial Accounting. In fact, many people are not even clear what accountants do or the purpose of the accounting process. In its simplest form, accounting is score keeping for business activity.
The game of baseball offers a terrific analogy. Baseball has an elaborate set of rules for official scoring, detailing exactly what happens, pitch-by-pitch. The information gathered allows analysis both during and after the contest. Baseball managers base in-game decisions on data collected from a host of sources, updated in real time by information contained in the official score. Accounting for business activity is very similar, if exponentially more complex.
The primary fields of accounting
Financial Accounting focuses on gathering information on business activity and generating formal reports in compliance with prescribed guidelines. Financial statements present both a static and dynamic view of a business’ condition. Outside stakeholders are the primary intended audience of those statements. The broad list of stakeholders includes owners, regulators, financial institutions, and business associates. The statements are retrospective and thus incomplete for day-to-day managerial purposes. Business managers gather the requisite data needed to generate financial statements. Typically, outside parties are also involved in the process. Auditing is the independent verification of information provided by management. It reflects the abundant professional financial accounting opportunities within and outside the firm.
Managerial Accounting gathers operating information for specific decision-making purposes. Managerial accountants, many designated financial analysts, are an embedded part of the management team, operating on a continual cycle. Forecasting is an example of managerial accounting in practice. Decision makers absolutely depend on educated, informed estimates of business performance and the business environment. The budget is an essential output of the managerial accounting process. It provides a managerial blueprint for upcoming periods. Managerial accountants apply standard practices and procedures, but there are no formal rules. The process is essentially unique in every organization. Excellent forecasters and analysts are worth their weight in gold.
Tax Accounting is the process of complying with federal, state, and local taxation regulations. While perhaps a necessary evil, it is very important. It requires knowledge of specific rules at each jurisdictional level and is usually an ongoing process rather than a periodic event. Career opportunities abound for well-educated and credentialed tax professionals.
Preparation for Accounting Careers
Graduate Accounting Degrees provide formal accounting education. The Master of Business Administration (MBA) is the most frequently held graduate business degree. An MBA introduces students to core management subjects, and then requires students to focus on a specific business discipline, such as accounting, suited to their career goals. Master of Accountancy (MAcc) and similar degrees are accounting-centric, delving deeply into all areas of accounting. MAcc curriculums only include courses in additional subjects directly supporting accounting functions.
Certifications are necessary for many accounting positions. The Certified Public Accounting (CPA) designation is often required for certain accounting positions. Successful completion of the CPA exam is one requirement for careers with public accounting firms. While not typically mandatory, employers consider those attaining the Certified Management Accounting (CMA) certification particularly well qualified for accounting job opportunities.
Those interested in accounting career opportunities have an immediate edge on prospective rivals by understanding the field. They can gain a competitive advantage through graduate education and certification. Those truly motivated, willing to commit time and resources, should take advantage of these options. In turn, this will make them well positioned to secure accounting jobs and develop accounting careers.