Financial accounting has been called the universal language of business, so it makes sense that all business professionals should be fluent.
While non-accountants may believe they don't need to study financial accounting, understanding basic accounting concepts such as the accounting equation and financial statements can be beneficial to all workers.
The following are six reasons why understanding financial accounting is beneficial to every professional.
Accounting refers to the process of reporting and communicating financial information about an individual or organization.
In simpler terms, accounting is how a business records its financial information. Accountants, or anyone else tasked with accounting activities, are concerned with capturing a snapshot of an organization’s financial health at a specific point in time.
Some common accounting activities include:
Financial accounting is an essential business skill for all professionals, despite the popular notion that only finance and accounting professionals need to be conversant with accounting concepts.
Whether you're an entrepreneur who needs to prepare financial records for your company, a business professional who wants to better understand and contribute to your organization's financial decision-making process, or someone who wants to make sense of their own finances, learning basic accounting can be beneficial.
Be honest: Can you explain where all your money goes after your paycheck gets deposited? With some accounting knowledge under your belt, you’ll gain a deeper understanding of what goes on with your personal finances and learn important skills, such as how to effectively track expenses and work within a budget.
There’s no shortage of scandal in the accounting world. You may have heard stories of illicit manipulation of financial documents for personal gain, or seemingly small accounting mistakes with disastrous consequences.
With a basic understanding of accounting, you can understand what these companies have done wrong and why it matters. You’ll also learn how current events related to finance and accounting might impact your organization and industry.
Picture this: You’re in a staff meeting and the chief financial officer (CFO) wants to discuss the past quarter’s financials. If you’ve had an introduction to accounting, you’ll not only be able to understand what the CFO is talking about, but also chime in with your own financial insight and opinions.
With accounting knowledge under your belt, you’ll also be able to determine the financial health of your organization on your own. With this information, you can glean meaningful insights and bring suggestions for improvement to upper management. Ultimately, understanding your company’s finances will help you be more effective in your role.
If you own a business or are considering entrepreneurship, you need to understand basic accounting principles to be successful.
Managing costs, cash flow, invoices, vendors, and payroll are all critical components of running a company. Some important accounting skills for entrepreneurs include preparing financial statements, determining how profitable your business is, forecasting future sales, and communicating financial information to stakeholders and investors.
As a business owner, studying accounting can put you one step closer to reaching your entrepreneurial goals.
Even if you're not an accountant by trade, accounting skills can help you advance your career. You’ll become more effective in your current role and a more attractive candidate for advanced roles.
Learning financial accounting also presents a pathway for you to transition into a finance or accounting role. According to the Bureau of Labor Statistics, employment in financial occupations is expected to grow five percent by 2029, which is faster than the average rate for all occupations. By studying accounting, you’ll develop the skills needed to qualify for such roles.
Organizations utilize financial statements like balance sheets and income statements to make data-driven decisions regarding investment opportunities, budgets, and resource allocation.
By learning accounting, you’ll be able to analyze financial statements to help inform business decisions and facilitate communication between your organization and its stakeholders. Not only will accounting skills make you a better decision-maker at work, but you’ll also learn to make more evidence-based decisions in your personal life.
Learning about financial accounting can be extremely beneficial regardless of your current position. You'll be able to better understand your personal and organisational finances, make data-driven decisions, and advance your career.