What you’ll learn to do: define accounting, and explain its role as a form of business communication
How businesses express their financial health and stability is by presenting an “accounting” of all their financial transactions. In this section you will explore in depth what accounting is and the vital information it communicates about the business.
- Identify the users and uses of financial accounting
- Identify the users and uses of managerial accounting
What Is Accounting?
Why Do we Need Financial Information?
As you learned earlier in the course, businesses have large groups of stakeholders who have a vested interested in the continued success of the enterprise. If a business, whether for-profit or nonprofit, becomes financially insolvent and can’t pay its bills, it will be forced to close. Financial information enables a business to track its accounts and avoid insolvency.
Each business needs financial information to be able to answer questions such as the following:
- How much cash does the business need to pay its bills and employees?
- Is the business profitable, earning more income than it pays in expenses, or is it losing money and possibly in danger of closing?
- How much of a particular product or mixture of products should the business produce and sell?
- What is the cost of making the goods or providing the service?
- What are the business’s daily, monthly, and annual expenses?
- Do customers owe money to the business, and are they paying on time?
- How much money does the business owe to vendors (suppliers), banks, or other investors?
The video below gives a brief overview of many of the topics in this section. Before you review the video, consider these questions:
- What is accounting?
- What is business?
- Who are the three people that want to know the story of your business?
- What language of accounting does the government use?
- What language of accounting do investors use?
- What language of accounting do internal users employ?
Accounting Is the Language of Business
Every business organization that has economic resources, such as money, machinery, and buildings, uses accounting information. For this reason, accounting is called the language of business. Accounting also serves as the language providing financial information about not-for-profit organizations such as governments, churches, charities, fraternities, and hospitals. However, in this module we will focus on accounting for business firms.
The accounting process provides financial data for a broad range of individuals whose objectives in studying the data vary widely. Bank officials, for example, may study a company’s financial statements to evaluate the company’s ability to repay a loan. Prospective investors may compare accounting data from several companies to decide which company represents the best investment. Accounting also supplies management with significant financial data useful for decision making.
Definition of Accounting
As the video explained, accounting is “the language of business.” The American Accounting Association defines accounting as “the process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by the users of the information.”
This information is primarily financial—stated in money terms. Accounting, then, is a measurement and communication process used to report on the activities of profit-seeking business organizations. As a measurement and communication process for business, accounting supplies information that permits informed judgments and decisions by users of the data.
Internal and External Users
Users of accounting information are separated into two groups, internal and external. Internal users are the people within a business organization who use accounting information. For example, the human resource department needs to have information about how profitable the business is in order to set salaries and benefits. Likewise, production managers need to know if the business is doing well enough to afford to replace worn-out machinery or pay overtime to production workers. External users are people outside the business entity that use accounting information. These external users include potential investors, the Internal Revenue Service, banks and finance companies, as well as local taxing authorities. Accounting information is valuable to both groups when it comes time to evaluate the financial consequences of various alternatives. Accountants reduce uncertainty by using professional judgment to quantify the future financial impact of taking action or delaying action. In short, although accounting information plays a significant role in reducing uncertainty within an organization, it also provides financial data for persons outside the company.
Financial accounting information appears in financial statements that are intended primarily for external use (although management also uses them for certain internal decisions). Stockholders and creditors are two of the outside parties who need financial accounting information. These outside parties decide on matters pertaining to the entire company, such as whether to increase or decrease their investment in a company or to extend credit to a company. Consequently, financial accounting information relates to the company as a whole, while managerial accounting focuses on the parts or segments of the company.
Because the external users of accounting information vary greatly, the way that financial information is presented must be consistent from year to year and company to company. In order to facilitate this, financial accountants adhere to set of rules called Generally Accepted Accounting Principles (GAAP). GAAP are a uniform set of accounting rules that allow users to compare the financial statements issued by one company to those of another company in the same industry. These principles for financial reporting are issued by an independent non-profit agency created by the Securities Exchange Commission (SEC) called the Financial Accounting Standards Board (FASB). The FASB’s mission is “to establish and improve standards of financial accounting and reporting that foster financial reporting by nongovernmental entities that provides decision-useful information to investors and other users of financial reports.”
Tax accounting information includes financial accounting information, written and presented in the tax code of the government—namely the Internal Revenue Code. Tax accounting focuses on compliance with the tax code and presenting the profit and loss story of a business to minimize its tax liability.
Accounting is more than just reporting income to taxing authorities or providing revenue and expense information to potential investors. As the language of business, accounting is used for decision-making as well.
Managerial accounting information is for internal use and provides special information for the managers of a company. The information managers use may range from broad, long-range planning data to detailed explanations of why actual costs varied from cost estimates. The employees of a firm who perform these managerial accounting functions are often referred to as Cost Accountants. Managerial accounting is more concerned with forward looking projections and making decisions that will affect the future of the organization, than in the historical recording and compliance aspects of the financial accountants. There are no reporting guidelines such as GAAP; therefore, managerial accounting reports will vary widely in both scope and content. Also, much of the information generated by managerial accountants is confidential and not intended to be shared outside of the organization. Managerial accounting focus on range of topics from production planning to budgets for raw materials. When a company makes a decision to purchase a component part instead of manufacture it in house, that decision is based primarily on managerial accounting information. For this reason, many managerial accountants consider themselves to be provide “accounting information for decision making.”
Bookkeeping vs. Accounting
Accounting is often confused with bookkeeping. Bookkeeping is a mechanical process that records the routine economic activities of a business. Accounting includes bookkeeping, but it goes further to analyze and interpret financial information, prepare financial statements, conduct audits, design accounting systems, prepare special business and financial studies, prepare forecasts and budgets, and provide tax services.
Importance of Accounting
You probably will find that of all the business knowledge you have acquired or will learn, the study of accounting will be the most useful. Your financial and economic decisions as a student and consumer involve accounting information. When you file income tax returns, accounting information helps determine your taxes payable.
Understanding the discipline of accounting also can influence many of your future professional decisions. You cannot escape the effects of accounting information on your personal and professional life.
Unachopaswa kujifunza ni jinsi ya kuelezea uhasibu na jinsi unavyoelezea uhasibu kama aina ya mawasiliano ya biashara, na jinsi biashara zinavyoonyesha afya na utulivu wao wa kifedha kwa kuwasilisha uhasibu wa shughuli zao zote za kifedha. Katika sehemu hii utajifunza kina cha uhasibu na habari muhimu inayohusiana na biashara. - Kutambua watumiaji na matumizi ya uhasibu wa kifedha - Kutambua watumiaji na matumizi ya uhasibu wa usimamizi Ni nini uhasibu? Kwa Nini Tunahitaji Habari Kuhusu Fedha? Kama ulivyojifunza mapema katika kozi, biashara zina vikundi vikubwa vya wadau ambao wana nia ya kuendelea na mafanikio ya biashara. Kama biashara, kama kwa ajili ya faida au yasiyo ya faida, inakuwa kifedha insolvent na hawezi kulipa bili zake, itakuwa kulazimishwa kufunga. Habari za kifedha huwezesha biashara kufuatilia akaunti zake na kuepuka kufilisika. Kila biashara inahitaji habari za kifedha ili iweze kujibu maswali kama haya: - Biashara inahitaji pesa ngapi kulipa bili zake na wafanyikazi? - Je, biashara hiyo ina faida, ikipata mapato mengi kuliko inayolipa kwa gharama, au ina hasara ya pesa na labda iko katika hatari ya kufungwa? - Ni kiasi gani cha bidhaa fulani au mchanganyiko wa bidhaa ambacho biashara inapaswa kutengeneza na kuuza? - Ni nini gharama ya kutengeneza bidhaa au kutoa huduma? - Ni nini biashara ya kila siku, kila mwezi, na gharama za kila mwaka? - Je, wateja wanadaiwa pesa na biashara hiyo, na je, wanalipa kwa wakati? - Biashara hiyo inapaswa kulipa pesa ngapi kwa wauzaji (wauzaji), benki, au wawekezaji wengine? Video iliyo hapa chini inatoa muhtasari mfupi wa mada nyingi katika sehemu hii. Kabla ya kutazama video hiyo, fikiria maswali haya: - Uhasibu ni nini? - Biashara ni nini? Ni nani wale watu watatu ambao wanataka kujua hadithi ya biashara yako? - Serikali hutumia lugha gani ya uhasibu? - Wawekezaji hutumia lugha gani ya uhasibu? - Ni lugha gani ya uhasibu watumiaji wa ndani kutumia? Kwa mfano, katika biashara, kila shirika la biashara ambalo lina rasilimali za kiuchumi, kama vile pesa, mashine, na majengo, hutumia habari za uhasibu. Kwa sababu hiyo, uhasibu huitwa lugha ya biashara. Uhasibu pia hutumika kama lugha inayotoa habari za kifedha kuhusu mashirika yasiyo ya faida kama vile serikali, makanisa, misaada, ushirika, na hospitali. Hata hivyo, katika moduli hii tutaweza kuzingatia uhasibu kwa ajili ya makampuni ya biashara. Utaratibu wa uhasibu hutoa data za kifedha kwa watu mbalimbali ambao malengo yao katika kusoma data hutofautiana sana. Kwa mfano, maofisa wa benki wanaweza kuchunguza ripoti za kifedha za kampuni ili kuchunguza uwezo wa kampuni hiyo wa kulipa mkopo. Wawekezaji wanaotarajiwa wanaweza kulinganisha data za uhasibu kutoka kwa makampuni kadhaa ili kuamua ni kampuni gani inawakilisha uwekezaji bora. Uhasibu pia hutoa usimamizi na data muhimu ya kifedha muhimu kwa ajili ya kufanya maamuzi. "Kama ilivyoelezwa katika video, ""Uhasibu ni lugha ya biashara"" - American Accounting Association hufafanua ""uhasibu kama mchakato wa kutambua, kupima, na kuwasiliana habari za kiuchumi ili kuruhusu maamuzi na maamuzi ya watumiaji wa habari." Uhasibu ni utaratibu wa kupima na kuwasiliana unaotumiwa kutoa ripoti juu ya shughuli za mashirika ya biashara yanayotafuta faida. Kama mchakato wa kipimo na mawasiliano kwa ajili ya biashara, uhasibu hutoa taarifa ambayo inaruhusu hukumu na maamuzi ya habari na watumiaji wa data. Watumiaji wa ndani na nje Watumiaji wa habari za uhasibu wamegawanywa katika vikundi viwili, vya ndani na vya nje. Watumiaji wa ndani ni watu ndani ya shirika la biashara ambao hutumia habari za uhasibu. Kwa mfano, idara ya rasilimali za binadamu inahitaji kuwa na habari kuhusu jinsi biashara ni faida ili kuweka mishahara na faida. Vivyo hivyo, wasimamizi wa uzalishaji wanahitaji kujua kama biashara inafanya vizuri vya kutosha kuchukua nafasi ya mashine zilizooza au kulipa saa za ziada kwa wafanyakazi wa uzalishaji. Watumiaji wa nje ni watu nje ya shirika la biashara ambao kutumia habari ya uhasibu. Watumiaji hawa wa nje ni pamoja na wawekezaji wa uwezekano, Huduma ya Mapato ya Ndani, benki na makampuni ya fedha, pamoja na mamlaka za kodi za mitaa. Habari za uhasibu ni muhimu kwa makundi yote mawili linapokuja wakati wa kutathmini matokeo ya kifedha ya mbadala mbalimbali. Wanasayansi wa uhasibu hupunguza kutokuwa na uhakika kwa kutumia uamuzi wa kitaaluma kuhesabu athari za kifedha za baadaye za kuchukua hatua au kuchelewesha hatua. Kwa kifupi, ingawa habari za uhasibu zina jukumu muhimu katika kupunguza kutokuwa na uhakika ndani ya shirika, pia hutoa data za kifedha kwa watu nje ya kampuni. Taarifa ya uhasibu wa kifedha inaonekana katika taarifa za kifedha ambazo zimekusudiwa hasa kwa matumizi ya nje (ingawa usimamizi pia hutumia kwa maamuzi fulani ya ndani). Wamiliki wa hisa na wakopeshaji ni wawili wa vyama vya nje ambao wanahitaji habari ya uhasibu wa kifedha. Wanachama hawa wa nje huamua juu ya masuala yanayohusu kampuni nzima, kama vile kuongeza au kupunguza uwekezaji wao katika kampuni au kupanua mkopo kwa kampuni. Kwa hiyo, taarifa za uhasibu wa kifedha zinahusu kampuni nzima, wakati uhasibu wa usimamizi unazingatia sehemu au sehemu za kampuni. Kwa sababu watumiaji wa nje wa habari za uhasibu hutofautiana sana, njia ambayo habari za kifedha zinawasilishwa lazima ziwe sawa kutoka mwaka hadi mwaka na kutoka kampuni hadi kampuni. Ili kuwezesha hili, wahasibu wa kifedha kufuata seti ya sheria aitwaye kanuni za uhasibu zinazokubaliwa kwa ujumla (GAAP). GAAP ni seti ya kanuni za uhasibu ambazo zinaruhusu watumiaji kulinganisha taarifa za kifedha zilizotolewa na kampuni moja na zile za kampuni nyingine katika sekta moja. Kanuni hizi za ripoti za kifedha zimetolewa na shirika huru lisilo la faida lililoundwa na Tume ya Uwekezaji (SEC) linaloitwa Bodi ya Viwango vya Uhasibu wa Fedha (FASB). FASB ina jukumu la kuanzisha na kuboresha viwango vya uhasibu wa kifedha na kuripoti ambayo huendeleza ripoti za kifedha na mashirika yasiyo ya serikali ambayo hutoa taarifa muhimu kwa wawekezaji na watumiaji wengine wa ripoti za kifedha. Uhasibu wa kodi unazingatia kufuata kanuni za kodi na kuwasilisha hadithi ya faida na hasara ya biashara ili kupunguza dhima yake ya kodi. Uhasibu ni zaidi ya kuripoti mapato kwa mamlaka ya kodi au kutoa mapato na gharama ya habari kwa wawekezaji uwezekano. Kama lugha ya biashara, uhasibu hutumiwa pia kwa ajili ya kufanya maamuzi. Taarifa ya uhasibu wa usimamizi ni kwa ajili ya matumizi ya ndani na hutoa habari maalum kwa wasimamizi wa kampuni. Usimamizi wa habari unaweza kutofautiana kutoka kwa data ya upangaji wa muda mrefu hadi maelezo ya kina ya kwa nini gharama halisi zilitofautiana na makadirio ya gharama. Wafanyakazi wa kampuni ambao kufanya kazi hizi za uhasibu wa usimamizi mara nyingi hujulikana kama Wahasibu wa Gharama. Uhasibu wa usimamizi unahusika zaidi na utabiri wa mbele na kufanya maamuzi ambayo yatathmini siku zijazo za shirika kuliko katika rekodi ya kihistoria na masuala ya kufuata ya wahasibu wa kifedha. Hakuna miongozo ya kuripoti kama vile GAAP; kwa hiyo, ripoti za uhasibu wa usimamizi zitatofautiana sana katika wigo na maudhui. Pia, mengi ya habari zinazozalishwa na wahasibu wa usimamizi ni siri na si lengo la kugawanywa nje ya shirika. Uhasibu wa usimamizi unazingatia mada mbalimbali kutoka kwa mipango ya uzalishaji hadi bajeti za malighafi. Kampuni inapofanya uamuzi wa kununua sehemu ya sehemu badala ya kuzalisha ndani ya nyumba, uamuzi huo unategemea hasa habari za uhasibu wa usimamizi. Kwa sababu hii, wahasibu wengi wa usimamizi hujiona kuwa hutoa "habari za uhasibu kwa ajili ya kufanya maamuzi". Uhasibu dhidi ya uhasibu Uhasibu mara nyingi huchanganyikiwa na uhasibu. Uhifadhi wa vitabu ni mchakato wa mitambo ambao hukariri shughuli za kawaida za kiuchumi za biashara. Uhasibu ni pamoja na uhasibu, lakini huenda zaidi ya kuchambua na kutafsiri habari za kifedha, kuandaa taarifa za kifedha, kufanya ukaguzi, kubuni mifumo ya uhasibu, kuandaa masomo maalum ya biashara na kifedha, kuandaa utabiri na bajeti, na kutoa huduma za kodi. Muhimu wa uhasibu: Yaelekea utagundua kwamba kati ya maarifa yote ya biashara ambayo umepata au utajifunza, utafiti wa uhasibu utakuwa muhimu zaidi. Maamuzi yako ya kifedha na kiuchumi kama mwanafunzi na mtumiaji yanahusisha habari za uhasibu. Unapowasilisha taarifa za kodi ya mapato, habari za uhasibu husaidia kuamua kodi unazopaswa kulipa. Kuelewa nidhamu ya uhasibu pia inaweza kuathiri maamuzi mengi ya kitaaluma ya baadaye. Huwezi kuepuka athari za habari za uhasibu kwenye maisha yako ya kibinafsi na ya kitaaluma.