What is Accountancy in Commerce? – Importance, Applications, and More

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what is accountancy in commerce

What is accountancy in commerce? – In simple terms, accountancy is a subject that accountants primarily need to learn to get a grasp of accounting. However, under the subject, there are many branches of accounting in which accountants specialize based on the skills and needs of the market. Generally, accountancy is one of the major branches of commerce study and is a vast subject consisting of various terms and theories.

In this article, you will learn about accountancy and its importance in commerce and business. You will also understand the purpose and importance of accounting and how accountants operate. Apart from that, we will also discuss some of the major branches of accounting for a deeper understanding. Finally, we will share with you some of the popular careers that one can choose after learning accounting.

What is Accountancy in Commerce?

According to AccountingTools.com,

“Accountancy is the practice of recording, classifying, and reporting on business transactions for a business. It provides feedback to management regarding the financial results and status of an organization. The key accountancy tasks are noted below.”

The subject mainly deals with measurement, analysis, and evaluation of the finances of a firm. People who learn accountancy (accountants) are able to read the financial statements of a business or a trader. The financial statements are required to maintain daily records of the business’s day-to-day transactions.

The recording of the transactions, their measurements, and analysis are collectively called the Accounting Cycle. The process of accounting basically helps in making business decisions since it deals with the recording of financial data.

The rules of accounting are set as per accounting standards, also known as Generally Accepted Accounting Principles (GAAP). Hence, the accounting principles are designed to improve the comparability and consistency of financial reporting across industries.

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Purpose and Importance of Accountancy 

According to Investopedia,

“Accounting is one of the key functions of almost any business. It may be handled by a bookkeeper or an accountant at a small firm or by sizable finance departments with dozens of employees at larger companies. The reports generated by various streams of accounting, such as cost accounting and managerial accounting, are invaluable in helping management make informed business decisions.”

The process of accounting basically provides you with a clear picture of the financial health of the company or the organization in question. The accounting data (or the finances) of the company serves as a catalyst for the business’s resource management, as well as its strategic growth.

Basically, with the help of accounting, the accountant inputs raw data and figures and retrieves processed information in the form of financial statements. These are done with the help of various accounting tools that accountants learn in the subject of accountancy. The whole point of the accounting process is to get an idea of what is working for the business and what is not working so that it can be fixed soon.

According to the Forbes Advisor,

“Accounting information exposes your company’s financial performance; it tells whether you’re making a profit or just running into losses at the end of the day. This information is not just available to you, but also to external users such as investors, stakeholders and creditors who would want to be enlightened about your business, to figure out whether it’ll be a good choice to invest in and what they can expect in returns.”

Accountancy in Commerce – What are the Types of Accounting? 

As already discussed, accounting is a vast subject, and you can break it down into different categories. Each of the categories in accounting consists of specific sets of information and helps document particular business transactions.

The following are the major branches of accounting about which you will need to know:

1. Financial Accounting

This is the process through which financial accountants generate interim and financial statements of a business organization. The results of the financial transaction are summarized in the balance sheet, cash flow statement, and income statement.

2. Managerial Accounting 

In managerial accounting, managers make use of financial data to make managerial decisions and organize and utilize information in various ways. They focus on making management decisions, forecasting, budgeting, and financial analysis tools.

3. Cost Accounting

The job of cost accountants is to enable the business to make decisions on costing. In cost accounting, the accountant considers all the costs that are in place with the production of a product or a service. Analysts, managers, business owners, and accountants make use of the information in cost accounting to find out the cost of the products. 

4. Tax Accounting

In tax accounting, accountants have to use different sets of rules to report the financial position of a company or any other organization. The rules are applicable at the levels of government (federal, state, and local). Tax accountants need to balance compliance with the rules of reporting so as to minimize the tax liability of the company they are working for.

What are the Types of Careers in Accounting?

Accounting careers consist of several levels depending on the specialized branch of the individual and the individual’s experience. One of the most common accounting jobs is that of a bookkeeper. There are also Qualified accountants who deal with advanced accounting practices. Some of the roles of qualified accountants in the United States include Certified Public Accountant (CPA) and Certified Management Accountant (CMA).

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What Does an Accounting Career Look Like? 

NetSuite.com states – “The regular duties of an accountant include preparing and maintaining financial reports, ensuring the accuracy of financial documents, evaluating financial results of operations, recommending best practices, offering guidance on revenue enhancement and cost reduction, conducting risk analysis, producing financial forecasts and, of course, preparing and filing tax returns.” 

If you are thinking about an accounting career, you will need to blend a variety of tasks like analysis, problem-solving, and detection of issues Hence, if you want to make sure that the job is rightly done, you will also need to effectively communicate the result to your clients. Therefore, you can see that the tasks in the job are much more than what people assume in the first place. 

In general, accountants have to work for companies, governments, and individual clients. Basically, the job of accountants is to ensure that the firms and the agencies run in an efficient manner. Furthermore, accountants also ensure that the forms keep their records in the right manner and pay the taxes to the right authority. 

In addition to that, there is also a need for accountants for internal and external consultation. Apart from that, accountants also analyze budgets and provide financial plans to their clients and employers. Moreover, it is also becoming common among accountants to provide technology consulting and limited legal services to their clients. 

In general, most accountants work nine-to-five jobs in addition to working longer hours. This holds true when they are working for an employer. However, there are many accountants who are self-employed and work for clients while managing their annual financial reports at the end of every fiscal year. 

The Need for Accountancy Jobs in the Market 

According to the US Bureau of Labor Statistics (BLS) –  

Employment of accountants and auditors is projected to grow 4 percent from 2022 to 2032, about as fast as the average for all occupations. About 126,500 openings for accountants and auditors are projected each year, on average, over the decade. Many of those openings are expected to result from the need to replace workers who transfer to different occupations or exit the labor force, such as to retire.” 

If you want to become an accountant, you will need to get an undergraduate degree in a related field. Some of these fields include finance, accounts, economics, management, etc. However, to become an accountant, you can also take professional courses. Apart from that, there are many junior colleges and correspondence courses from which you can get diploma certifications to start as a junior accountant. 

Furthermore, as you grow as an accountant, you will need to file reports with the US Securities and Exchange Commission (SEC). However, to do that, it is important for you to become a Certified Public Accountant (CPA). To become one, you will need to meet the requirements of your state and also pass a national-level exam. Note that becoming a CPA is extremely difficult. Hence, make sure you prepare for the exam with rigor and seriousness. 

Wrapping Up

What is accountancy in commerce? I hope this article was helpful for you in getting a better understanding of what accountancy means in commerce or business. Basically, it deals with debit or credit, which is the language of a business or financial transaction. The job of the accountant is to ensure that the debit and credit match or find out the difference.

The process of accounting is vast, and there are many types of jobs based on the branch with which an accountant is associated. Do you have any more information to add regarding the study of accounting? Share your thoughts and opinions with us in the comments section below.

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