What is an accountant?
An accountant is responsible for overseeing the flow of money within a business or organization. Accountants must ensure that financial transactions are accurate, and they help individuals and organizations with money-related issues like taxes and investments.
Did you ever wonder how Skyler White discovered some accounting irregularities in the books of Ted Beneke on the TV series Breaking Bad? The reason is simple. She’s an accountant.
Accountants ensure that all financial transactions follow current ethical and legal guidelines. When Skyler confronted Ted, she warned him that he would get in trouble with the IRS. Ted then admitted that he committed fraudulent transactions just to keep his company afloat.
The origin of accounting
Depending on where they practice, accountants must comply with various government and regulatory groups who impose strict ethical standards and guiding principles, such as Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards (IFRS).
Considered the first in the world, the American Association of Public Accountants was organized in 1887 to address the growing needs of bondholders and shareholders to know of the financial status of the companies that they have invested. In the year 1896, accounting became important that they saw the need to license professional CPAs. Accounting as a formal discipline can be said to be born out of the Industrial Revolution.
In recent years, interest in accounting has exponentially grown due to the demands of the global economy. International corporate scandals and financial crises require the creation of stricter laws which in turn increase the applications for more stringent auditing practices.
Last February 22, 2018, the Financial Crimes Enforcement Network of the U.S. Treasury Department accused the Latvian Central Bank Chief of money laundering and sanctions-busting. He was then suspended while investigations are being made. But regardless of the outcome of the inquiry, Latvia’s reputation as a financial hub is already tarnished. It is scandals like this that brings accounting as a discipline into the forefront of the modern economy.
What are the duties of an accountant?
An accountant can perform different accounting duties and may come in different titles. The most common ones are Certified Public Accountant (CPA), Certified Internal Auditor (CIA), and Certified Management Accountant (CMA). Of the three, only CPAs are required to have a license to practice. Here are examples of transactions which may involve an accountant:
- Issuing official receipts to customers
- Recording expenses like salaries given to employees
- Receiving and recording invoices from suppliers
- Ensure that business is efficiently running where money is involved
- Suggest ways in which a company can increase profit and reduce costs
- Verify that statements and records are compliant with laws and regulations
- Update account books and accounting systems
Aside from these, accountants may also file reports. The most common ones are:
- Financial statements issued to business owners, lenders, and creditors. These statements may include a balance sheet, statement of cash flow and income statement.
- Tax statements issued to different government entities. You might be familiar with income tax and property tax because these statements require you to interact with an accountant personally.
Within an organization, an accountant might also initiate the creation of different processes to ensure that business assets are managed well.
How can an accountant affect investing?
Accountants play an essential role in the life of an investor. The obvious one would be when you need to file tax returns. Complex tax return statements make it easy for investors to make mistakes which can have unwanted consequences. A good accountant can help you sort this out and find ways to minimize your taxes legally.
As an investor, you also need to know the financial health of the company you’re planning to invest in through their financial statements. All financial statements of all publicly traded companies are created and reported using the standards established by the Financial Accounting Standard Board (FASB).
The requirements set forth by FASB prevent irregularity in the timing and style of financial statements. As an investor, you’re less likely to get information that has been filtered to suit the company’s present financial health. With the help of an accountant, you can understand these statements and have a stable baseline for analysis to make a well-guided business decision.