The Importance of Basic Accounting Knowledge in Business

<!– @page { margin: 0.79in } P { margin-bottom: 0.08in } A:link { so-language: zxx } –>

After completing my first year of business classes at West Chester University, I realized how important accounting knowledge is for any business major. Regardless of the field of business that you choose to pursue, whether it be marketing, management, economics, or finance, you will need to be able to have at least a basic understanding of accounting. Every business has to deal with observing and understanding source documents, income statements, balance sheets, and statements of retained earnings in order to be successful in today’s business world. Anyone interested in entrepreneurship who is looking to start their own business will have a definite advantage if they can understand financial statements of accounting. The truth is that accounting exists in our every day lives whether you realize it or not, so being educated in the field will do nothing but help you in a future business career.

The process of accounting will almost always begin with source documents. In the past, most of the source documents that CPA’s (Certified Public Accountants), auditors, and other accountants would have to deal with were tangible paper documents such as receipts from a recent purchase at a store. The accountant would then have to transfer these source documents into a journal to start the accounting process. Today, most of the source documents are electronic. When a purchase or sale is made between any two businesses or consumers, it is filed into a computer on an electronic database. This method has made accountant’s jobs far more simplistic, as they can they place the transaction directly into an electronic journal on Microsoft Excel.

The basic accounting equation that anyone who works in business should know, is that Assets= Liabilities + Equity. Assets include accounts such as cash, land, building, equipment, office supplies, inventories, and accounts receivable (money owed to you by a customer). The normal balance for these assets are a debit, which means if you are gaining any of the previous, you debit that amount of money towards that account. For example, if a sale is made in your store and a customer pays fifty dollars cash, then you would debit the cash account for fifty dollars. Liabilities include accounts payable (what you owe others on account), unearned revenue (you have been paid but haven’t performed a service), salaries payable (salary money owed to your employees), taxes payable, and interest payable. The normal balance that increases these accounts is a credit, unless the account is a contra account in which the opposite normal balance applies. Equity accounts include dividends (money owed to your stockholders), revenues and expenses. The normal balance for owner’s equity is a credit, but expenses made by your business are always treated as contra accounts. So for a transaction where a customer purchases something from your store on on account, you would debit accounts receivable and credit revenue. Each transaction is then recorded into a journal organized by month.

At the end of each month, the totals are added up from the journal and are placed into what are called “T-Accounts”. These are T-shaped charts with the debits on the left side and credits on the right. It is used to more easily find the ending balance of each account at the end of the month. After the totals of each account are found, you can now make an income statement to determine your amount of money lost or made during the month. The amount of income can be found by subtracting the expenses from your revenues. This is one of the most important financial statements that accountants have to deal with. Your income statement helps you determine if you are making profits or if you are losing money and need to improve a sector of your business.

Once you have transferred all of your journal entries into T-accounts and have made an income statement, you are then prepared to make a balance sheet. This is the basic accounting equation in which you make sure that Assets = Liabilities + Owner’s Equity. When you sum all of your asset accounts they should be equal to all of the liability and equity accounts as well. This is why anyone in any type of business should always have a basic understanding of the accounting process. With the knowledge of how money flows throughout a business, you can make wiser, more experienced decisions with your business, and protect yourself from losing money. It also allows you to take risks with your business and potentially gain a big return when it comes to the bottom line of your income statement. I’m pleased to say that I can now understand a company’s financial statements and comprehend the transactions that go on in every day business. Any business student will be more successful in their future career if they learn the crucial basics of accounting.



<!– @page { margin: 0.79in } P { margin-bottom: 0.08in } –>

Dynamic Culture of Accounting Profession

Dynamic Culture of Accounting Profession

Sean Lowery

Cost Accounting 303

October 25, 2009

In the business world, the Accounting profession has been referred to by many as the “language of business.” The field is defined as the study of how businesses track their income and assets over time. Duties involve preparing financial statements, computing costs, and developing certain tax strategies. Accountants, today, work as consultants in business. They advise management in many different financial decisions and are involved in many business transactions.  An accountant must possess a wide variety of skills. Analytical skills, computer skills, and communication skills are all necessary to have in the profession.  The changing atmosphere of the accounting profession has resulted in a more demanding curriculum, but allows for many diverse job options in accounting.

Accounting has undergone many changes over the past several decades that have changed the field drastically. Globalization is a key factor that changed the profession and how it is defined. Since many companies are now going overseas, the need for a set international standard of accounting is needed. For example, more investors are looking overseas for possible investment opportunities, so reliable information from an international company is needed.  Accounting professionals must keep up with globalization by providing more accurate and up-to-date information.  They must understand foreign companies’ business practices and business laws. Another factor that contributes to the changing environment of the field of Accounting is the increase regulations and government control. Financial accounting usually is overseen by the Federal Accounting Standards Board, FASB. Accountants must also conform to the principles which are outlined in the Generally Accepted Accounting Principles, GAAP. In the past decade, a handful of incidents have called for changes in regulations. Major scandals include the incident of Enron and TYCO electronics. In response to these scandals, the federal government has created the Sarbanes Oxley Act. This law set new standards that would enhance companies’ reliability and accuracy in their financial reporting. Many aspects of the legislation provided significant changes, particularly in how auditing is conducted. These changes call for companies to spend millions of dollars to keep in compliance of the new legislation. The Sarbanes-Oxley Act of 2002 also allowed for changes that greatly affects internal users such as managers and executives.  New industries have also called for major changes in the Accounting profession.  In the future, changes will occur that will increase the outlook for accounting majors. Many current accountants are retiring or a few years away.

The accounting field is increasingly becoming more demanding. To keep up with the dynamic culture of accounting, the curriculum and standards for accounting has become stricter. The highest certification for an accountant is passing the Certified Public Accountant exam, CPA. This rigorous exam is composed of four parts, which include auditing, financial accounting and reporting, regulation, and business environment. Before, people gained the certification by simply passing the four part exam. However, in the past decade, new requirements have been set before a person can sit for the exam. For many states, it is now required to have 150 semester hours and two years experience in public accounting. Specifically in Pennsylvania, the 150 hours and two years of public accounting experience will be implemented in the 2011. The reason for this change is to make the accounting field a more technical field. It also allows people to be better prepared to work in the changing environment of businesses today. They will be better prepared to tackle new challenges in the field such as working with advancing technology and dealing with more complex business decisions. The 150 hour requirement eliminates any inconsistencies between state-to-state regulations. Accountants will be able to work in other states without conforming to the specific standards the state has in place. The new consistency of standards between states is needed in today’s high tech, global environment. The new requirements benefits business is so many ways. After finishing a bachelous degree in Accounting, many go on to get a Masters in accounting or get an MBA, Masters of Business Administration. The added education illustrates the commitment to the profession which can only be a benefit.  Even though there will be an increase demand for accountants, many people are choosing not to enter the major because of the increase in requirements for CPA’s and government regulations. The American Institute of Certified Public Accountants, AICPA, stated that between 1996 and 2000, the number of students pursuing an accounting degree decreased by 25%. However, the percentage of people who pass the CPA for the first time had increased. The decrease of people pursuing an accounting degree is contributing to a likelihood of substantial salary increases for CPA’s This can be explained by the implementation of the 150 hour rule.

Accounting offers many opportunities and job options. Many new opportunities have been created due to the changing culture of Accounting. Before, accounting graduates would enter into the field with a good mindset of what they were going to do. For many who obtained their bachelors in Accounting, they were most likely going to work in a big four firm, attempt to certified, and advance within the career. The Big Four firms include PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young, and KPMG. Specifically, the new industries created in the past decade helped to offer more opportunities in Accounting. New industries lead to more specialization in Accounting. Instead of accountants doing a wide variety of tasks at a big firm, Accountants are working in small or mid-sized CPA firms. These smaller firms focus on a specific type of company or size of company. Examples of these firms include BDO Seidman, Grant Thornton, and RSM McGladrey. Biotechnology, environmental business, telecommunications all require accountants to operate efficiently. A new trend for accounting majors is the increase in non accounting field. Many accounting majors end up working in careers related to finance, management, marketing, or even computer science. Accountants, in the past, were not necessarily considered to be consultants. They explained costs and assets, but were not in control over profit gaining. Making accountants influence in revenue generation allows for more options in the career. Many accountants take jobs as in budget analysis. Budget analysis involves developing and managing organizations financial plans.  Managerial Accounting very much involves consulting with top management on strategies to maximize profits. A popular trend in the Accounting field is tax strategy. Accountants who have knowledge on federal tax regulations may pursue career options in developing tax strategies and increasing profits. Women are especially experience more opportunities in Accounting. There has been a large increase of women accounting graduates and many go on to work in variety of different careers. Some women accountants end up working in financial institutions, education, health care institutions, etc. Many Accounting majors are pursuing careers in the FBI. Many accountants who work for the FBI work as forensic accounting. Forensic accounting involves investigating white collar crime. The need for forensic accounting is increasing as a result of white collar scandals in the past decade.

In conclusion, the accounting profession has undergone many changes, which calls for a more demanding curriculum and more job options. Accounting remains to be and will always be considered to be the language of business. The field is now more than just how businesses track their income. Accountants carry a wide variety of skills, many of which who have developed new skills in the past few decades. It is correct to say that accountants are now consultants who are involved in advising management.

Cuddy, B. (1992, Summer). New career paths in accounting. Massachusetts CPA Review, 66(3), 8. Retrieved October 24, 2007, from Business Source Premier database.

Business Credit. (2002, October). Working Smart: New Education Requirement Poses Challenges for Accounting. Business Credit, 8. Retrieved October 24, 2007, from Business Source Premier database.

Warner, J. (2007, September). The New Specialists. Directorship, 44(7). Retrieved October 24, 2007, from Business Source Premier database.

Forensic Accounting: Investigation of Fraud and Criminal Activity in the Modern Business World

Alarming sums of money are stolen from businesses each year by trusted employees.  It is estimated that in 2008, at least Billion will be lost by businesses as a result of fraudulent activities.  Surprisingly, smaller companies suffer the majority of the losses.  This is due to their lack of funds to implement preventative procedures in concert with a generally stronger trust and more personal relationship with employees.  In order to prosecute those responsible for these crimes, it is important to understand the path leading to the fraud.

 

Forensic accounting is a rapidly expanding field involving careful investigative work, in depth financial analysis and an understanding of the legal system.  Forensic accountants must think on their feet and work side-by-side with law enforcement personnel in order to solve the puzzles surrounding fraud cases.  Frequently they are required to testify in court as expert witnesses and provide key evidence leading to convictions.  Evidence is gathered from books and other records including computers, hard drives, and email correspondence and computer records.  It is then carefully traced back to where the problem first began.  Forensic accountants act as detectives, lawyers, CPA’s and scientists.  These professionals often have highly developed deductive reasoning skills, familiarity with legal procedures, good writing skills and excellent public speaking skills.  They have the responsibility of convincing a judge and jury that the evidence they have gathered is solid.  Forensic accounting played a large role in convicting Al Capone for tax evasion.  It also figured prominently in exposing the Enron and WorldCom scandals.

 

As technology improves and the amount of money stolen from companies and corporations grows, the demand for forensic accountants has grown rapidly. Considered to be one of the fastest growing accounting jobs, it is predicted that this profession will be among the top twenty in the next few years.  Schools have begun to offer programs in this field to help meet the strong and ever increasing demand for forensic accountants.

 

In the computer age, fraud comes in many forms.  It is much easier for criminals to embezzle money without detection.  This is why forensic accountants typically need advanced computer knowledge.  They must be able to extract evidence from computer hard drives.  Business owners look to forensic accountants to help implement preventative measures.  Many businesses hire these professionals to examine documents and computers regularly so that the chances of a serious problem are minimized.  Forensic accountants also find employment in police departments, law firms and governmental agencies such as the FBI and the IRS.

 

While working for a law firm, there are a variety of legal disputes that a forensic accountant may assist in.  In divorce cases, assistance is needed in dividing assets.  Disputed assets are often investigated behind the scenes in order to determine the most equitable way to split them as well as determine if both parties are credible.  Forensic accountants also assist lawyers in bankruptcy cases.  Evidence is gathered to ensure that there is no suspicious financial activity surrounding the case.  Copywriting and patent infringement, insurance fraud, personal injury, and construction audits are among the kinds of cases that forensic accountants are often called upon to investigate. Police departments hire forensic accountants for many of the same reasons, especially to gather evidence for prosecution that will stand up in court.

 

Forensic accounting professionals express a high level of job satisfaction.  The profession typically offers excellent compensation (0K+/year) and the investigative work is very intellectually challenging.  There is always something new and exciting to work on every day.  It is clearly extremely rewarding to be able to identify those responsible for stealing millions of dollars and in some cases for saving businesses.

 

Until more educational institutions start offering forensic accounting programs, employers often look for Certified Public Accountants, who are certified in Fraud Examination to fill forensic accounting positions.  It is preferred that the job candidates have accounting experience and a good knowledge of the law along with strong computer science, writing and investigative skills.  Background checks and reference checks are also necessary to ensure that new employees have a clear criminal record and a good reputation in the community.

 

Forensic accountants are vital to the survival of both large and small companies.  There will always be new work to do as technology advances.  People with an interest in accounting and detective work who are inspired to identify criminal activity and therefore prevent business failures should consider this as a career option.

                                                      References

Echie, K. (September, 2008). The Training and Skills You Need to Become a

 

       Forensic  Accountant. Retrieved September 30, 2008.

Gold, L. (August, 2007). Litigation Support: Can I Get a Witness? Accounting

 

      Today, Volume 21, No. 15. Page 1. Retrieved September 30, 2008 from:

 

       LexixNexis Academic Database.

Moncliff, J. CSI of Accounting Jobs. Retrieved September 30, 2008.

Ray, R. (October, 2007). Experts in Detecting Financial Misbehavior Match

 

        Wits With Fraud Artists in a Rapidly Growing Field. The Globe and Mall.

 

        Retrieved September 30, 2008 from: LexixNexis Academic Database.

 Russell, M (April, 2007). Be a Financial Detective. Retrieved September 30,

 

        2008.

Stone, J. (November, 2006). Forensic Accounting The Detective Breed of

 

         Accounting Careers. Retrieved October 22, 2008.

Winters, A. G. Forensic Accounting. Retrieved September 30, 2008.

 

            

Mail Accounts Window


Image by d00d

Ken Boyd, owner of St. Louis Test Preparation (www.stltest.net) presents part seven of his course on Understanding Management Accounting. Boyd points out that students can have success with Management Accounting concepts by making connections to actual examples from business. As a former CPA, College Accounting professor and Auditor, Ken has a wealth of experience to bring to the subject.

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. 

Microsoft Office Accounting Express 2007 – First Look


Image by programwitch

The Time Accounting module is for maintaining a time card based on Projects and Tasks. Once correctly setup, the tool can, in addition to the working units in OTRS, be a great controll point for managers and company owners, not only for billable hours, but for personnal management. This short video will help you understand and setup the basics.
Video Rating: 0 / 5