ABCs of Accounting

Introduction

Well! If you plan on taking on accountancy, you must know the ABCs of Accounting. Knowing ABCs simply means knowing everything about finance. Accounting is a procedure that involves reporting, recording, evaluating, and summarizing financial and economic data. The introduction to accounting is all about assisting a company's decision-makers in making successful decisions by providing information on the organization's financial health.
Accounting, according to the American Institute of Certified Public Accountants (AICPA), is the "art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions, and events that are, at least in part, of financial character, and interpreting the results thereof." It is utilized by everyone nowadays, and having a thorough understanding of it is advantageous to everyone. Accountancy serves as a financial language. Accounting aspects must be understood to grasp accounting efficiently.
In this informative blog, we will discuss the ABCs of accounting so that you can make better decisions for yourselves. 
Importance of Accounting
The importance of accounting shows the objective of accounting. Accounting availability in each company transaction sparks the business to run efficiently, effectively, and correctly in all activities conducted. It leads to increased output since management will make better decisions and plan more effectively due to a corporation's smooth flow of transactions. 
Here are the reasons why accounting is important- 
  • Maintaining Records - To run efficiently, every firm must retain records and act on them. Accounting is important in keeping records in this scenario. All records are collected, sorted, and evaluated to be conveyed to end users, assisting in making an economically viable decision that will lead to the business organization's good productivity. 
  • Real-Time Decision Making - Decision-makers frequently desire to see the impact of their purchases or hirings. Real-time bookkeeping makes budgeting and tracking cash flow easier, allowing you to avoid unexpected time constraints. It is one of the most important benefits of having up-to-date accounting data. To have frequently updated accounts, it is critical to have a modern fiduciary with an online platform that is accessible at any time and from any location to get accounting information as needed.
  • Information to Investors - Financial statements and accounts are utilized for representing the firm to its stakeholders, including debtors, creditors, the government, investors, customers, and employees. Many investors will avoid your company if you do not have financial records and accounts to provide them so they can understand the business's success.
  • Track Profits - Profitability is the primary goal of any firm. Every firm, whether small or large, must have an accounting system to determine how much money they make on their commercial activities. It also allows interested parties to make decisions about the advancement of corporate productivity.
  • Budget Planning - Any company's primary purpose is to maximize profits. Every business, big or small, needs an accounting system to track how much money they make from their commercial activity. It also enables interested parties to make decisions on how to improve corporate productivity.
What are the types of Accounting?
Accounting can be divided into two parts - Managerial Accounting and Financial Accounting. 
Financial accounting entails creating accurate financial statements and aims to measure a company's performance as accurately as possible. While financial statements are intended for external consumption, they may also be used to assist internal management in making choices. Accounting principles and standards extensively used in financial accounting include US GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards). Accounting standards are crucial because they enable everyone with interest to easily comprehend and decipher the financial statements produced year after year.
The managerial or management accounting field examines the data obtained by financial accounting. It refers to the process of preparing business operations reports. The reports are designed to help the management team make strategic and tactical business choices. It is a procedure that helps an enterprise maximize efficiency by examining accounting data, determining the best next steps, and communicating these future steps to internal business managers.
In addition to learning types of accounting, it is important to know the golden rules of accounting, which depends on the types of account you are dealing with. 
Courses in Accounting
Now that you are determined to pursue accounting, you must know everything about finance courses. Several courses can be taken to hop on to the accounting engine. Read below to learn about accounting courses available - 
  • ACCA (Association of Chartered Certified Accountants) - As it is a globally recognized course with industry-relevant content, ACCA accreditation is an excellent way to begin a career in accounting and finance. It has three levels and requires a lot of practice and training to complete. Top online coaching like NorthStar Academy can assist you in passing the ACCA Course. A course like this helps you learn the ABCs of accounting and helps you find the right place in the finance market. The ACCA is recognized in Canada, Singapore, the United Arab Emirates, and over 180 other countries. Because of their cutting-edge skill sets, industry titans such as The Big4, Credit Suisse, Goldman Sachs, and many more are actively hiring ACCAs. Such finance courses help you learn the ABCs of accounting and be more proficient in their field in India and abroad.
  • US CPA (United States Certified Public Accountant) - The American Institute of Certified Public Accountants (AICPA), a US-based accounting group, grants the US CPA license. Accounting laws, taxes, and principles are among the subjects covered in the course. The CPA license in the United States certifies you as an accounting specialist and provides a world of opportunities.
  • Cost Management Accounting - The Institute of Cost Accountants of India (ICAI) offers three levels of training in CMA. To operate as a cost accountant, candidates must complete all accounting-related tests. The courses include an introduction to accounting and also help you know more about accounting principles
  • US CMA (Certified Management Accounting) - The Certified Management Accountant (US CMA) is one of the most popular worldwide accounting certification programs offered and administered by IMA. The duration of the course might range from 6 months to 4 years. This course helps you learn everything about finance - from management to financial analysis. 
  • CIMA (Chartered Institute of Management Accountants) - CIMA is a management accounting course that will prepare you for a rewarding career in financial industries such as wealth management, banks, audit firms, investment banks, information technology, and even e-commerce. Because the CIMA has a partnership with the US CPA board, you can earn an extra CGMA designation with a CIMA degree and 36 months of practical experience. Thus, it helps you know the ABCs of accounting and move ahead in your career. 
  • B.Com in Accounting and Finance - A bachelor's degree in accounting and finance (B.Com) is a three-year undergraduate curriculum. It is an accounting and financial management course that covers the fundamentals. It includes basic accounting, which helps to set the foundation for further courses. 
  • M.Com in Finance and Accounting - The Master of Commerce (M.Com) in Accounting and Finance is a two-year postgraduate accounting and finance curriculum. It is a more advanced level of systematic study focusing on specialized finance and accounting disciplines like the importance of financial accounting, cost accounting, and so on. B.Com combined with M.Com will help you understand everything about finance
  • CA (Chartered Accounting) - The CA program is a professional accounting qualification that allows graduates to operate as chartered accountants. The Institute of Chartered Accountants of India (ICAI) offers this course. It is one of the best courses in accounting in India, which offers a pool of opportunities to accounting individuals. 
  • Financial Modeling - A bachelor's degree in Financial Modelling may take 3 to 4 years, whilst a certificate course may take 1 to 2 years, and if you choose a short-term online course, expect a learning journey of as little as two weeks. But a bachelor in Financial Modeling is recommended if you are directly opting for the course after class 12th. It is because you will get to learn all about accounting and finance.
Careers in Accounting 
Accounting is one of the most popular job options among Indian students. Candidates interested in a career in accounting have many alternatives. Accountants work in both the public and private sectors. If you want to be an accountant, numerous job opportunities are available to you. This training allows you to apply for a variety of jobs. One can even work outside of India. Accounting tasks that are frequently performed include:
  • Accountants calculate how much a corporation owes in federal, state, and municipal taxes. They keep track of tax dates, produce required paperwork, and guarantee that the company pays on time.
  • Accountants keep track of the money that enters and exits their organization. They evaluate financial flow and debt, ensuring that the organization maintains correct and adequate records. They also manage financial data information systems.
  • Accounting firms are relied on by employers to report any financial hazards. When evaluating new projects, managers consult with accountants. Accountants can also calculate the risks of financial statement inaccuracies.
  • Internal audit: When accountants do an internal audit, they thoroughly analyze their company's financial records. They use this information to recommend enhanced financial operations. 
  • Accounting professionals frequently oversee payroll, pay vendors, talk about billing difficulties, and collect payments.
Every firm needs an accountant to monitor and maintain the company's financial records. It allows the company to assess its success or failure and plan for the future. In this field, various positions are available. There are lucrative opportunities for chartered accountants in both India and abroad. The following are the job roles an accounting candidate can apply for - 
  • Financial Controller
  • Finance Manager
  • Certified Public Accountant 
  • Financial Advisors
  • Director of Finance
  • Chief Financial Officers
  • Chartered Accountant 
  • Chartered Management Accountant 
  • Company's Secretary
  • Compliance Officer
  • Budget Analyst
  • Comptroller
  • Internal Auditor
  • Tax Auditor
The following companies hire people in accounting in India and globally - 
  • Wipro Limited
  • ITC Limited
  • TATA Motors
  • Vedanta Ltd
  • Bharat Electronics Limited
  • The Big Four (Ernst & Young, PwC, Deloitte, and KPMG)
In addition to these companies, companies from abroad hire individuals having CPA, CMA, ACCA, and CIMA degrees and certifications. It adds value to the company as the individual knows everything about finance.

FAQs

1. What are the ABCs of Finance?

Finance is the study of how individuals, businesses, and governments manage money. The ABCs of Finance include understanding concepts like budgeting, investing, risk management, and the time value of money.

2. What is Finance?

Finance is the term used to describe anything related to managing and generating  money and other financial assets. Although it deeply impacts our lives, many individuals don't even know the ABCs of Finance. Finance can be categorized into three primary types - Public Finance, Private Finance, and Corporate Finance.

3. What are the benefits of saving money?

Saving money has many benefits; it helps you have a secure financial future. Saving is handy in emergencies; it reduces your reliance on debt. If you have saved some money, you can also take advantage of any new investment opportunities. Most important of all, it offers peace of mind and a sense of control over one's financial situation.

4. Why is budgeting important in Finance?

Budgeting is crucial in Finance. It enables you to plan your finances, set goals, and allocate resources effectively. It helps in reducing unnecessary spending on products that you may not need. Thus, keeping your expenses in check. Proper budgeting can help you deal with your debts more effectively. It also assists in planning a roadmap for achieving long-term financial stability and success.

5. How can I manage and reduce my debt?

First of all, you need to understand where you stand. First, evaluate all your debts, and know the total amount and interest rate of the debts. Allocate some money from your monthly salary for the repayment of the debts. Pay the debts with higher interest rates first. If the maturity date is near and you do not have the required sum, you may consider issuing a new loan from the bank to settle that debt. You should also try to earn more money to clear your debts.

6. What is financial planning?

Financial planning is a process of evaluating an individual's current financial conditions and constructing a well-defined plan to achieve the required financial goals while considering current and future needs.

7. How can I improve my financial literacy?

To improve financial literacy, you can start by reading books and articles on Personal Finance. You can seek guidance from financial advisors and practice budgeting and financial planning to gain hands-on experience with managing money effectively. However, if you want to know everything about Finance and not just the ABCs of Finance, then enrolling in a financial accounting course is the best way to go.

8. What is compound interest?

Compound interest is the concept where interest is calculated not only on the initial amount of money (principal) but also on the accumulated interest. It results in the interest earned being reinvested, leading to exponential or compounded growth over time. Compound interest is the most commonly used concept in today's world. Long-term investments and savings accounts use this concept.

9. What is credit, and why is it important?

Credits can be considered as a financial agreement between the lender and borrower with the promise of future payment. The borrower promises to repay the lender, often with a pre-determined interest rate. It is important because it allows individuals and businesses to make purchases or investments without having to pay the full amount upfront. How the borrower repays, the lender impacts the borrowers credit score.. A higher credit score allows individuals to get larger loans at a lower interest rate.

Conclusion

Accounting is known as "the language of business" since it not only helps you keep track of your money but also allows you to make informed business decisions. Companies hire accounting professionals to ensure proper financial audits and reporting, and it is important to know the ABCs of accounting if you want a blooming career in accounting. It is only possible if you have a certain accountancy degree or certificates to showcase your skills and knowledge and stand out from other people in the job interview. 
Now that you know everything about finance, it is time to get yourself grinding and bury yourselves in the book until you achieve your career goals. You can join the best prep provider - NorthStar Academy, for all the prestigious accounting professional courses, including CMA USA, US CPA, ACCA, and CA. 
Make an Enquiry