Accounting and It's Impact on Business Management

Accounting has been called the language of business and in a very real sense it is. Studying business through the lens of accounting provides a perspective accessible through no other discipline. Accounting takes you deep inside an organization. Every transaction an organization undertakes has an impact on its financial well-being. Accounting tracks those transactions and reports their effects.

If you want to be an expert on France, you would do well to learn the French language. If you want to be an expert on Latin America, a solid knowledge of Spanish would be a great asset. If you want to understand the game of baseball, you need to understand its lingo. So it is with business and its language.

Accounting is part of the bedrock of our culture and economic system. Consider the following: Most of us were brought into this world in a very sophisticated, complex organization - a hospital. The clothes we wear, the food we eat, the cars we drive, the gasoline we put in those cars and the education we receive come to most of us through organizations. When we die it's more than likely we'll be laid to rest by an organization. In other words, virtually every aspect of our lives, in one way or another, is affected by organizations.

It's probably impossible to overstate the importance of the role organizations play in our daily lives. Take them away and we would live in a very different society. Without the information accounting provides to managers of these organizations, commerce as we know it today would not exist. Rather, it would probably be carried on through some sort of rudimentary barter-style economy.

All the organizations we depend so much on cannot stay in business without effective management. Read the business section of your local newspaper for a week and note the businesses and nonprofit organizations that are quitting operations. For one reason or another, these organizations did not satisfy the needs of their potential customers in an effective manner. So, perhaps it is not hyperbole after all to say that organizations are central to our wellbeing and our way of life and that accounting plays a very important role by providing information necessary for their effective management.

The performance is very likely to be evaluated on the basis of accounting numbers. (Did you meet your budget? Are your overhead costs under control? What drives those overhead costs? What are the profits and return on investment your division earned this past quarter?) Understanding what accounting numbers mean, what they don't mean and how they can be used for your benefit is vital to your success.

By Tina S Smith----->Article Source: http://EzineArticles.com/7935220