Why learn about the role of accounting in business?
Accounting plays a vital role in running a business because it allows management to track income and expenditures; ensures statutory compliance; and provides investors, management, and government with information they require.
Managers need accurate and timely financial data to make intelligent decisions, and accountants are the ones who record and present this information. While the accounting process collects the data and presents it in various types of reports, accountants help to interpret the meanings of financial reports and suggest ways to use these details to solve business problems.
Investors include active owners who are running the business and passive investors who just have money at stake. They both want to know whether the business is making money or losing money, along with information about why. And the government wants to know how much the company is making so it can collect the proper amount of taxes.
All of this involves accounting, which is basically collecting, summarizing, and reporting on the often massive amount of data that represents the mission of every for-profit business: to make money.
In this module, you’ll learn how accounting has evolved over the years into the critical information system it is today. You’ll also learn about the basic cornerstone of modern bookkeeping—the accounting equation, and finally, you’ll explore some of the most important challenges that face the accounting profession today.