Accounting in Everyday Life

As long as there will people in this world, there will be business, and as long as there is business, there will be accounting. Accounting is involved in virtually everything in our lives whether we know it or not, and its importance can sometimes be overlooked. Everything needs accounting. From a baseball cap you wear, to the food you eat, to the company you work for, or even the music you hear on the radio, accounting is needed and was involved in all of those things steps of production or operation.

An accountant measures, aggregates and reports financial information necessary for the sake of decision making by organizational managers, owners, investors, government agencies and other users. From the previous statement, we can see the indication that shows how accounting is important in careers. Everything needs accounting. Whether you are a doctor, or an ordinary office worker, you would still need to play with numbers and take into account the cost of things that you used or used by someone else. Timely and accurate information on operations is crucial to success in the recent days of rapidly changing business environment, and the accountant is the one responsible for the critical business function that mostly though indirectly affects our career and everyday life.

In the career perspective every occupation must carefully manage their money, their cash inflows and outflows. Jobs such as independent contractors have to analyze how much the job is going to cost them and how much they are going to charge for the job. They must track all their expenses and estimates in order to not under cost and to charge appropriate prices. In simplest form, this is accounting. If not accurately tracked and estimated, that contractor's business will not profit and eventually go out of business. Same thing goes for big business, if that company or firms does not accurately handle the operations of its cash flows, it will not sustain for long. More and more today employees such as secretaries and receptionists are being taught basic accounting practices to help aid the accountants and to keep proper bookkeeping. This way these employees can manage the lower importance items of a business and leave transactions of higher significance to the accountant to analyze and interpret for decision making purposes.

Accounting in Everyday Life

In one's life, can we say accounting will promote a better lifestyle? I say, definitely yes. The management and control of personal finance is a subject of immense importance today to people. In the world that we lived in today, there is barely a single person who lives without a single debt in their life. Debts ranging from credits cards, car payments, mortgages, and so on, one can find themselves stuck in economic hardships that in some cases destroy lives and has become wake-up calls to many people. Wouldn't it be nice to know exactly where the increases and decreases are coming from and going to, respectively, to whatever degree of detail you need? Of course it would be. Many of us spend without much thought on the impact of the action. It is essential on knowing the proportions being spent on the basic necessities and luxuries and how to have that proper balance across our expenditure. Life is not as easy as driving on the road with traffic lights and signs along the way, but we still need financial signals in our life whether we are in a comfortable phase or in the danger phase that requires help. Accounting can help people detect these dangers. If not much, the least it can do is ensure that your debt is under control and manageable.

Handling all the calculations of accounting can be tedious and bothersome but can make all the difference one's finances. You can strategically plan ahead to save for your retirement, your children's college fund, or luxury or two later down the road. We can see the importance of this concept by noticing companies today whose operations are strictly financial advising. It can be concluded that in the era that we are living in today, Families, and retirees depend on the credibility of financial reporting for their futures and livelihoods. With financial pressure amounting in many peoples' lives, accounting is seen as important in so many ways that it is almost impossible to live without it.

Accounting in Everyday Life
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Matthew Clark
25 October 2009

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The Origin Of Accounting Theory

If it is to be comprehensible and reliable, accounting must be used in accordance with specific rules and regulations. It would be chaos of Babylonian proportions if each person used his own grammar and vocabulary - nobody would understand anybody else. Likewise, it is essential that accounting is used according to generally accepted rules.

The first prerequisite is that accounting should agree or conform with the basic truths according to which our economic system functions; the current economic and business practices and the applicable law as embodied in legislative regulations or common law. Consequently, it is important that uniformity is maintained in accounting practice; in other words, a specific set of circumstances, wherever it may be encountered must be dealt with by everyone in exactly the same way within the accounting process.

Accounting theory creates a framework that ensures that accounting practice complies with the requirements of conformity and uniformity. This theory is embodied in a set of principles, policies, methods, procedures and conventions. The continuously increasing scope and complexity of our economic system requires a corresponding process of adaptation in accounting in order that the relevant information regarding economic activities may be recorded. It is essential that everyone involved in accounting should understand this process of adaptation; moreover, a prerequisite for such understanding is a grasp of not only the theory of accounting, but also the structure of that theory.

The Origin Of Accounting Theory

Accounting theory is based on a set of basic economic truths that are of a dual nature. First, accounting theory is based on propositions generally accepted in the economic order of a particular society. For example, consider the concept of personal ownership: a general accepted tenet of our society is the exclusive right of every person to own things - they are his personal property and no one else's. This concept is a basic economic truth.

Second, the basic economic truths have characteristics similar to those of natural laws in the sense that specific causes generate specific consequences. If, for example, someone derives greater value from a transaction than what was put into the transaction, his net worth - his wealth - will have increased by the surplus amount. This, too, is a basic economic truth. These economic truths are formulated as concepts and postulates. A concept is a generally accepted view of a specific phenomenon, which is described in specific terms. A postulate is a generally accepted hypothesis or supposition of a specific condition or phenomenon, which serves as a basis for the formulation of principles.

In the development of accounting theory, concepts and postulates serve as formulations of the basic truths or propositions upon which the theory is based. They do not attempt to prescribe the working of the accounting process, but simply the foundation upon which the structure of accountancy is based.

The Origin Of Accounting Theory
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Michael Russell

Your Independent guide to Accounting

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Close Your Accounting Books Fast With a Month-End Checklist

The month end close checklist is a system that allows a company to facilitate the end of month accounting department closing process. A comprehensive month end close checklist will contain much useful information that is exhaustive in its detail and may cover the following areas: bank reconciliation, budget versus actual, cash flow analysis, accounts payable, accounts receivable, fixed assets, debt reconciliation and a host of other items.

When using a month end close checklist, it is highly recommended that most small to medium size companies prepare six binders, one each for Accounts Receivable, Sales Orders, Accounts Payable, Purchase Orders, Payroll and General Ledger. The binders should be 3 or 4 inches thick and can be obtained from the office supply stores with each binder having twelve dividers, one for each month. In each of these binders place the completed month-end checklists and month end reports as printed out by the accounting.

Once these procedures are followed diligently, the month end close checklist system will assist the company auditing department, which must provide relevant information to the IRS and to other state tax auditors. In addition, this system acts as a fallback in case of a disastrous system or backup failure.

Close Your Accounting Books Fast With a Month-End Checklist

There are two types of closing checklists. Those that pertain to year end (hard closes) and those pertaining to month end (soft closes) and each is useful in providing managers in the organization with important financial information, especially for internal use. With the growing use of computers, the month end close checklist has now found its way into software packages that automate the whole process for the current month and for the next month.

An important aspect of month end close checklists is the presence of closing process controls which can be either preventive or detective and which are used to produce company financial reports for each month. Usually companies formulate their own regulations to ensure that the procedures that they use are effective and that the reports accurately provide month end information about the financial position of the company. The checklist is there to provide a method of keeping accurate financial records that are both consistent and well maintained.

There are a number of vendors selling month end close checklists that, after a lot of research and expert advice, have been diligently prepared and which take into account all aspects of the company's accounting procedures. The checklist can also be tailored to suit individual needs as required. The cost is not more than ten dollars and the benefit to the user is tremendous as there is no need to do much more than fill in the relevant information and once that is done, the month end close checklist is ready to be used for the individual company's accounting system.

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Wade Anderson is a CPA and operates DigitalWorkTools.com
Legal Forms and Business Documents. Click to view a Month End Close Checklist

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Why Accounting Standards Are Important?

In all types of businesses, accounting is not merely the recording and the keeping track of a business' finances, but accounting must also adhere to a certain set of accounting standards.

Basically, accounting standards, which are generally the accepted principles, guidelines and procedures that standardize accounting practices with regards to the recording and reporting of business transactions across the country and around the globe, ensure that there is a reasonable degree of uniformity in the accounting policies throughout the world with respect to collection and presentation of accounting information; thus, ensuring that accounting decisions are made in a unified and reasonable way, as well as ensuring that the process of accounting, the keeping track of a businesses' finances, the interpretation of these numbers and the wherewithal to place them in the proper context, which are at the heart of accounting, are done and reported fairly and accurately.

Accounting standards do not only safeguard investors and creditors, but also helps the businesses themselves, providing them with accurate, relevant, useful information that would help them in making well-informed investment decisions as well as help them in facilitating reasonable assessments of performance and assess their businesses' growth and evaluate the success of their strategies.

Why Accounting Standards Are Important?

Specifically, accounting standards ultimately ensure that business entities record and report financial information in a way that most fairly and clearly represents the current financial standing of the operation. This, thus, provides both investors and the entity itself with access to the most relevant information in the most reasonable way possible, helping them make well-informed decisions.

Designed to enforce transparency, accounting standards therefore ensure that businesses lean in the direction of openness when deciding on how to provide information to organization observers by limiting the freedom and flexibility of businesses in using clever accounting to move items around or even to hide them. Therefore, both consumers and investors are protected from the risk of fraud by the business. This is because businesses work to ensure compliance with regulatory accounting standards to avoid the significant legal costs or criminal penalties associated with accounting inconsistencies. Also, accounting standards improve the efficiency of markets as national regulators use these standards to help provide their nations' enterprises with access to foreign markets and capital.

With these, the interests of investors are therefore protected as well as it ensures them that their investment is still substantiated. Basically, educated investors usually need relevant, useful information to make their investment decisions as well as ensure them that the money they put into a company will result in a return on investment and build shareholder value, and that is what "high quality accounting standards deliver".

By practicing proper accounting standards, one can therefore provide confidence to a greater number of investors, both locally and globally, that their investments will be responsibly managed and protected by them. This would create the business' credibility, which in turn could mean a greater investor interest and further investment in the company.

Finally and most significantly for businesses, by using consistent accounting standards, this is one way that business managers will be able to reasonably and accurately compare their performance. This is because different companies use the same accounting standards, and the businesses that opt to do so will be able to contrast their growth with that of competitors. This, thereby, helps business managers and investors identify strengths and weaknesses.

In addition, practicing proper accounting standards will ensure that financial statements can be reasonably compared over time. By comparing current and past performances, managers will be able to assess and evaluate their businesses' growth and the success of their strategies.

Why Accounting Standards Are Important?
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