Accounting is both the body of knowledge and the practice related to recording the many financial transactions of businesses and other organizations such as governments and non-profits. Accounting covers issues such as classifying the transactions, keeping records of the transactions, and then summarizing, processing or interpreting the transaction information for many different parties including owners and other management, bankers, investors, government tax entities, and government regulators.
Importantly the specialized needs of these different parties has led to specialist fields of accounting, including tax accounting, financial accounting (for banks and investors), management accounting (to help run the business better), and auditing. Parts of the large field of accounting are practiced by accountants (who may have just one specialty), as well as by bookkeepers, controllers, and chief financial officers, and by small company founders who have to wear many hats. Accounting errors are very common in small businesses, in part because the well-trained practitioners are not cheap, and many of the systematic rules of accounting are not obvious to the untrained. Accounting errors can lead to severe or fatal business problems.
Accounting is sometimes called “the language of business,” but it’s more properly viewed as “one of the languages of business.” Marketing, strategy, business models and financing are also business languages that should be learned. And accounting as a language has different dialects – tax accounting, management accounting, financial accounting, audit.