No matter which business you are engaged in, every business regularly needs the services of financial accounting. Every business around the world, be it the local cafe around the corner, all the way to MNCs like Convance need to regularly hire accountants to make sure that all their records are maintained properly, and the flow of money both into the organization and outside of it, is smooth and effortless.
If you are planning for a career in Financial accounting and you have already enrolled yourself in a Financial accounting course, then you are well aware of the high demand it has across the world. But are you aware of the many advantages and disadvantages of this job role? In this article, we will explore exactly that.
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What is Financial Accounting?
One of the first and most important aspects to understand is the meaning and definition of financial accounting. In simple terms, accounting can be defined as the process of maintaining financial records pertaining to a business. Financial records can be further categorised into credit and debit of the organization, or in simple terms how much has come into the organisation and how much of it has gone out.
No matter the area of business or industry one is engaged in, the needs of an accountant is regular.
The process of accounting includes recording the transactions of an organisation, summarising all the transactions, analysing all the transactions and then reporting these transactions to an oversight authority which generally includes tax agencies and other financial regulatory boards. Accounts for a company are generally generated once a year, and depending on the size of the company can be created twice a year or more as well.
How Does Accounting Work?
Now that we understand the meaning of accounting, let us understand how it exactly works.
Depending on the size of the organisation and the total revenue it generates, the type and number of accountants the organisation hires also varies. For example, a small firm or organisation may employ only a single accountant or bookkeeper, while on the other hand, a large organisation may have a full-fledged financial department, which keeps track of its day to day transactions. The role of an account in a business is crucial, irrespective of its size mainly due to the fact that it helps key stakeholders be informed on the financial strengths and weaknesses of the company, and thus decide on the best way to move forward.
Advantages of Accounting
Mentioned below are some of the most significant advantages of accounting:
Maintaining Business Records
One of the first and most important advantages of accounting is maintaining the records of a business. When an accountant maintains all the transactions that are happening in a business, the whole process becomes much more streamlined, and the key stakeholders can easily understand the financial state of the company and decide on the best way to move forward.
Comparison of Records
It is always advised that a business hires an accountant from the very first day of its operation, as it will help them maintain records from the very beginning. Maintaining yearly records comes with the obvious advantage that year on year reports can be combined to review if the company has been performing well or not.
Disadvantages of Accounting
Mentioned below are some of the disadvantages of accounting:
Only Monetary Transactions
One of the major disadvantages of accounting lies in the fact that it is only able to record the monetary transactions of an organisation and nothing else. A business has a variety of transactions on a daily basis, and although not all of them are monetary, they have a significant standing in impacting the state of the business and much more.
Just like any other business process, accounting has its advantages and disadvantages, but overall a career in accounting is highly rewarding and thus worthy of pursuit. So if you are planning to pursue this career, now would be a good time to enroll yourself in a Financial accounting course.
Also Read: What is Corporate Financial Accounting