What Is Accounting?

Published on October 3, 2022

What Is Accounting? was originally published on Forage.

Woman making accounting calculations

Accounting is organizing and summarizing financial data for a business. Working in accounting involves a variety of tasks, including analyzing financial data and auditing a company’s finances. While accounting may seem like a career that exclusively deals in adding and subtracting, there are actually many different areas of accounting in a multitude of industries. 

In this guide, we’ll cover: 

Accounting Definition

Every business needs accounting — how else would companies be able to understand their financial footing and future growth (or decline)? Sometimes, accounting is called “financial reporting” because it focuses on the analysis and communication of a business’ financial information. 

Additionally, accounting may include reporting important financial information to external authorities. For example, tax accountants make sure their company is meeting tax requirements and that the Internal Revenue Service (IRS) has accurate information. 

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Accounting typically includes two sectors: financial accounting and managerial accounting. 

Financial Accounting

Financial accounting deals primarily with reviewing and reporting transaction data for a company. This boils down to: how much cash went out and how much cash came in? 

In practice, it’s much more complicated than that. Businesses often have many financial aspects that need to be recorded and reported, such as non-liquid assets, (like real estate), revenue streams, investor cash, and shareholder equity. 

Managerial Accounting

Managerial accounting involves taking the financial data of a business and using it to inform decision-making for the company as a whole. In managerial accounting, accountants look at all of the financial documents to figure out what they mean for a company and what changes need to be made moving forward. 

While financial accounting is recording and reporting, managerial accounting is interpretation and analysis. 

>>MORE: Learn if finance is a good career path. 

Careers in Accounting

People who work in accounting are typically called accountants. But, many different job titles exist within the world of accounting. Additionally, because accounting is core to any business, accountants can work in a wide variety of industries and sectors.

Accounting Jobs

Auditor
Auditors track accounts and ensure information is recorded accurately. 

Forensic Accountant
Forensic accountants investigate financial information to find areas of fraud or misconduct, usually for law enforcement agencies.

Tax Accountant
Tax accountants prepare and file tax documentation for a business and ensure it’s following all local, state, and federal regulations. 

Budget Analyst
A budget analyst, or cost analyst, reviews a company’s spending habits and determines ways to make the budget more efficient. 

Controller or Financial Manager
Controllers or financial managers are high-ranked finance professionals who develop long-term financial plans and ensure a company stays in good financial health. 

Chief Financial Officer
The chief financial officer (CFO) is the top-ranked person regarding a company’s finances, so they oversee finances for the entire organization and help other executives make decisions. 

>>MORE: See 20 popular careers in finance.

Accounting Industries

Practically every organization needs accounting. Accountants, and other related professions within the accounting world, can work in nearly any industry, including:

  • Banking
  • Health care
  • Technology
  • Transporation
  • Retail
  • Nonprofit
  • Government (local, state, and federal)

Explore other career paths:

Advantages and Disadvantages of Accounting Careers

Advantages

One advantage of a career in accounting is that there are options available within most industries. 

Daniel Siciliano, CPA, CMA, senior lecturer in accounting at University of Nevada, Las Vegas, says, “The career options within accounting are varied and include fast paced high reward jobs and slower paced jobs that are more quality of life focused.” 

Additionally, accounting is a stable field to get into. Every company needs accounting, and it’s a growing career. According to the U.S. Bureau of Labor Statistics, employment for accountants and auditors is expected to grow 6% from 2021 to 2031. 

Disadvantages

A key disadvantage of working in accounting is the pressure of the job. Companies are dependent on accurate accounting to survive, so there’s a need for precision and attention to detail. 

Additionally, some financial information necessitates working with hard deadlines, creating longer working hours and a more stressful environment. This is especially true for tax accountants during tax season. 

Another disadvantage some people may find is the subject matter itself.  

“I have found that there are negative views around the accounting profession as it is deemed boring or a passion for maths is needed,” says Francis Fabrizi, an accountant at Keirstone Limited. “However, this is not the case, especially now that there are so many accounting software and apps to help make accounting tasks as easy as possible.”

>>MORE: Learn what a career in accounting is like with Forage’s accounting virtual experience programs. 

How to Get Into Accounting

Education

A You usually need a bachelor’s degree in accounting, or a related finance topic, to get a Certified Public Accountant (CPA) license or to find an entry-level position in the accounting field. 

“An accounting qualification is not necessary for most entry-level positions which usually involve processing and generating invoices, payroll, assisting with basic bookkeeping and general administration tasks.” Fabrizi says, “Roles like these are a great way for someone to ‘test the water’ and decide whether to take their finance career further.”

Certifications and Licensing

Accountants can get several different certifications or licenses, but the most common one is the CPA license. Qualifications for a CPA license vary by state, but you generally need a four-year degree, a few years of accounting experience, and to pass the CPA exam. 

The CPA exam is tough, but having this certification is one of the most important tools for progressing in an accounting career. 

“Many CPAs can move into other areas of business like finance or operations and many times CPAs can be promoted to the top position in the company. It is very hard to be an executive without understanding accounting,” notes Siciliano.

Skills

A career in accounting requires at least some skills in math. Additionally, to be successful, you need skills like:

You can learn these skills and more with Forage’s finance and accounting virtual experience programs. 

Image credit: AndrewLozovyi / Depositphotos.com

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