The Role of Accounting in Business and Our Society

Accounting
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To capture the finical information within any firm, there are four types of financial statement that are crucial to the running of the business. A balance sheet is one of them and its main purpose is to give the financial position at a specific time of a business with reference to the assets, liabilities and equity for the shareholders. As such, it can be said to the quick snap shot of the firm’s financial position at specific time. The second financial statement is the income statement. This is a document that indicates the performance of the firm with reference to the income and the expenses. As such, it shows if the firm is making a loss or a profit by basically subtracting expenses from income. The third is the cash flow statement which indicates the cash movement and the balances at the bank within a specific period of time with reference to the financing activities, operating activities and the investing activities. The final statement is referred to as the statement of changes in equity or the statement of retained earnings. It indicates how the owner’s equity has moved over a given time period. The balance sheet is the ultimate statement as summarizes all the financial undertakings of the firm into a simple and very powerful indication of the business position and the basic health.
While the accountant takes care of the financial records in a firm given that they have the knowledge of how the different elements affect the business, they can never do the work of a certified public accountant (CPA). The CPA can offer financial advice, represent clients in the IRS cases, conduct financial audits as well certifying financial statements, which an accountant cannot. This mostly due to the fact that a CPA is more academically qualified and regulated by the state, therefore holds more mandate and responsibilities that a normal accountant (Accounting Simplified, 2014).
Majority of the decisions that...