In every field in the corporate world, from manufacturing to services, there are various departments the main aim of which is to achieve a common goal. While the process of the department may be completely independent from the others, the thing that links them together is the Accounting and Finance Department. The main reason for this is that every aspect of each department is recorded and reported to various users of financial reports, depending on their motives. Therefore, the need for qualified and knowledgeable accountants is decisive in almost all cases. However, before examining the essential personnel characteristics, a general insight into the topic of Accounting is necessary.
Main objectives of accounting
According to the International Accounting Standard Board (IASB), the objective of accounting and financial reporting is “to provide information about the financial position, performance, and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions.” In other words, Accounting helps an organization to comply with various statues and regulatory requirements, while forming the backbone for financial planning, analysis, bench-marking and decision-making.
What is usually considered as an end product of accounting is financial reporting, which consists of the following typical components: financial statements (balance sheet, profit and loss accounts, cash flow statements, and statements of stockholder’s equity), reports (quarterly and annual), and analysis. All of these play a significant role when it comes to evaluating a company’s position/conditions and setting future goals.
However, besides the company’s motives, and the interests of all those who are stakeholders, there are some external constituents as well, namely, the parties which are interested in the financial situation of an organization. This might include, for instance, partners, institutions (tax authorities) or even customers. Moreover, financial reports are vital for providing information to potential investors, promoters, and creditors, to enable them to make rational decisions concerning investments, loans, etc.
Concerning the financial reports themselves, there are at least a few major items which should be or are expected to be recorded. This feature, however, depends on the type of financial report (which have been discussed above). One of the necessary items can be the assets of an organization. Assets are basically the things that a company owns, and they are usually divided into two groups: tangible and intangible. Tangible assets are the ones that are “physical”. For instance, buildings, equipment, cash. Intangible assets, on the other hand, include software, knowledge, information, etc. Obviously, these items should be mentioned on the balance sheet of a company in order to understand the exact amount of assets and, therefore, the value. Another example of the “mandatory items” in the financial reports can be revenues and expenses. These are among the main focus of the income statement, the function of which is to provide information on the company’s earnings and the expenses incurred during a defined period. A list of the examples, however, can be extremely long, yet all of them have a huge importance in a company’s life.
Distinction between financial and managerial sectors
In addition to the variables that occur among the items included in accounting, there are some distinctions within the accounting field itself, namely, it is divided into financial and managerial sectors. Even though both of these types refer to accounting, the difference between them is noteworthy.
Financial accounting, as stated before, deals with standard financial statements (balance sheet, income statement and cash flow statement). The focus, in this case, is more on past data and it is used more by external users to assess a “company’s health”. Moreover, financial accounting follows GAAP (Generally Accepted Account Principles) and is usually audited.
Managerial accounting, on the other hand, is dedicated to specialized data products (analysis) to help internal users/managers to make smart business decisions that affect the future. This may include more detailed information, not necessarily of a financial character. Another important characteristic of managerial accounting is the fact that it does not need to follow GAAP, nor will it be audited.
Last but not least is budgeting, its purpose, and its importance. Budgeting, like accounting, is a fiscal process that involves planning, allocating, and distributing financial resources. In general, budgeting is usually explained more like a plan for obtaining and using resources, which includes both planning and goal setting, as well as controlling, and ensuring movement toward the company’s goals. The importance of budgeting lies in coordinating the activities of departments, allocating resources, as well as evaluating management’s performance and forcing managers to think long term. However, it is worth mentioning that budgeting and its functions are dependent upon the accounting of past-year and current-year expenditures, revenues, transfers, and general adjustments.
Having analyzed the core aspects related to Accounting, its functions and main constituents, it is evident that Accounting is essential to the success of any company. However, the part without which accounting cannot function is, obviously, the executors or so-called accountants themselves. Being an extremely detailed field, Accounting requires a specific type of staff, able to assess, identify, follow, control and when necessary change the process, together with a readiness to take responsibility. However, apart from being knowledgeable and exceptionally accurate, there are important personal features which help to make a proficient accountant.
Key skills for accountants
The very first thing that may must be emphasized for any person who is considering Accounting as a field is the willingness to deal with paperwork. It is not a secret that accountants mainly deal with numbers and data on a daily basis, which, depending on the size of the company, can be and really is a demanding task. This leads to continuous time and work pressure, as well as the necessity to organize one’s own work and cooperate with others. Therefore, one of the most significant characteristics of the successful accountant is excellence in organization skills.
Another, equally important aspect is continuous learning. While accountants absolutely need to have a solid grasp of the basics, the necessity of being constantly ‘updated’ is vital as well. Due to the fact of the unceasing development of new laws, regulations, principles, and so forth, accountants should be flexible and should possess a rigorous understanding of the latest news, which is undoubtedly easier nowadays due to the development of technology. This feature can be a decisive one in terms of being on the board in a long term, which leads to the following, additional imperatives.
Ethics and integrity are probably among the most valued features in the accounting sphere. As mentioned above, the level of responsibility at the discussed position is relatively high, requiring from accountants integrity in the work process and, especially in bookkeeping activities. Once the regulations are violated, serious problems can follow, for instance, fraud and cooking the books. In such cases, disregarding whether accountants participated or simply were following orders, they may be considered as participants in any and all illegal activities.
Taking everything into account, the importance of both accounting and proficient accountants is evident. Accounting is the process by which a company can keep up with the market, obtain investments, etc. However, more importantly, accounting is part and parcel of a company’s internal world. Together with a knowledgeable staff, accounting can be seen as a mechanism which helps organizations to assess and maintain their operations without missing any vital items. As a result, accounting together with a solid execution can ensure for the company a stable and secure future.