The concept of accounting and individuals acting as accountants can be traced back to the very inception of business transactions themselves, with accountants acting in a variety of capacities that facilitate the function and expansion of both businesses and individuals.
Even in modern times, accounting and accountants themselves are vitally important to the very structure of whole business sectors and financial markets owing to the massive benefits they impart to economic entities or individuals that procure their services.
The advantages to hiring or otherwise using an accountant are massive, with various types of accountants being able to act in a plethora of capacities pertaining to the function, processing, measurement and disclosure of financial information both internally and externally within an entity or between individuals.
What is Accounting?
By pure definition, accounting is the act of preparing, sorting, disclosing, interpreting and controlling of financial data and related information for an individual or financial entity, most often in the form of a business or estate with significant assets under their ownership.
Accounting – and by extension, accountants- are considered one of the main cornerstones to the very function of the economy itself, allowing businesses to perform transactions both between one another and with their customers. The very function of financial transactions would be otherwise impossible without the presence of accountancy in some shape or another.
Accountants are trained and certified to act in a variety of capacities such as that of a communication facilitator between an individual and regulatory tax bodies, as investment advisors, tax auditors for governing bodies, internal payroll dispensers, and even general management in certain situations.
All these functions of an accountant equate to larger scale financial entities hiring entire teams of accountants so as to account for every avenue under the purview of accounting, of which would be otherwise difficult for any one individual.
Are there Multiple Kinds of Accountants?
The field of accounting may be divided into a multitude of subtypes depending on the particular function the accountant is working or specializing in, such as internal financial accounting for large scale corporations, management accounting in order to facilitate the function of a business, tax accounting and even forensic accounting for law enforcement entities.
While the majority of accountants in business tend to be certified and qualified to perform practically every function involved in these capacities, certain situations may call for a specialist that has significant training or experience in a certain sub-section of the accounting field, such as an accountant with experience working under local tax code laws, of which may be unfamiliar for other certified accountants.
Ideally, teams of accountants with varied specialties may exist within a financial entity so as to ensure the smooth function and complete effectiveness of said entity’s economic ability, allowing it to avoid such things as penalty fines and both internal and external financial miscommunication.
Additionally, accountants may be divided into their respective certifications, most likely of which will depend on the exact geographical location that they received said accounting certification.
Titles such as certified public accountant or CPA and chartered accountant or CA primarily refer to whether the accountant has been deemed qualified by regulatory bodies within or outside the United States.
What are the Functions of an Accountant in Business and Individual Finance?
As previously mentioned earlier in this article, accountants act in a variety of faciliatory ways for individuals and financial entities so as to facilitate their function and transactions.
Primarily, accountants may act as compiling and interpreting financial bookkeepers for use internally within the entity or for disclosure to outside entities such as tax auditors, governing bodies or prospective investors.
These often take the form of financial statements, wherein the general information collected by bookkeeping employees within a financial entity is compiled and made readable by an accountant or accounting department also found within the same financial entity.
Apart from the preparation and interpretation of financial statements, accountants in business and individual finance can act as advisors to the executives of a financial entity on matters such as the company’s budget, the cost of operation of said entity, appropriate dispensation and sectioning of funds as well as internal management pertaining to finance and financial matters.
Individuals may also delegate their personal financial matters to a certified accountant they have hired, with matters such as tax advisory, tax filing, financial estate management and personal financing all falling under the purview of an accountant’s services towards an individual or their family.
Why Should Businesses Have Accountants?
While it is often recommended for a financial entity to hire at least one accountant during certain periods of the year, this primarily applies to smaller organizations such as single-branch restaurants or small stores with little overhead and relatively simple finances.
The story changes once the organization or financial entity begins to grow in size, with financial complexity increasing as the operations of said organization or entity also grow, in turn requiring full-time accountants to be hired, sometimes even entire departments of accountants dedicated to certain tasks involving the finances of the organization.
Even before a business or financial entity has taken legal form, hiring an accountant is an advisable choice, as they can help navigate the oftentimes perplexing laws and specifics involved in creating a new financial enterprise.
Accountants may act in both a managerial and advisory capacity for businesses that are growing larger or have already reached a certain level of financial complexity, allowing executives of said businesses to act with the full amount of information needed to make sound decisions, such as in the case of expansion or even in converting to a publicly traded company.
In short – accountants are vitally important for both specific circumstances and general function in a business, and it is best to hire at least one during the life-span of a business or financial entity.
Why Should Individuals Have Accountants?
Personal accounting is known as the particular branch of accounting concerning individuals and their finances, often performed by stand-alone freelance accountants that work on a contract by contract basis or otherwise performed by an accounting firm that specializes in such matters.
The most common form of personal accounting concerns that of tax returns and the complexities involved therein, with the majority of individuals generally being untrained or uninformed about the various caveats that may allow for larger tax returns or prevent costly penalties imposed by the governing tax body.
Hiring an accountant in this situation has proven to be both cost-saving and time-saving, allowing the individual to perform their other duties without worry and the assurance that a professional is ensuring their maximum tax returns and/or tax rebates.
Other forms of personal accounting can concern general lifestyle budgeting through the interpretation and modification of their daily to monthly spending habits, with the accountant acting in an advisory capacity to the individual in order to optimize their budget and spending.
Even in the case of a now deceased client, an accountant kept on retainer or hired by the governor of said deceased individual may perform duties such as analysis and general expenditure concerning the client’s estate, providing both a third-party assurance to the estate’s beneficiaries and ensuring that the estate itself is financially tended to appropriately.
What are the Advantages of Hiring an Accountant?
Whether it is a single individual in possession of significant assets or a corporate entity requiring navigation through complex laws, hiring a properly certified accountant is an excellent choice, not only to save said individual or corporation valuable time but to also prevent anything from going awry from unfortunate financial or logistical blunders.
Informational Benefits
Perhaps the primary function of any accountant, the interpretation and usage of financial information in concern to an individual or financial entity is of vital importance, regardless of the complexity of said individual or entity.
This information may come in use during situations such as appraisal of the individual or entity’s total assets, in the event of an external or internal audit, in the calculation of important figures concerning the individual or entity such as their profit margins and quarterly budget as well as determining the liquidity itself of said individual or entity’s assets.
Disclosure Benefits
Tangentially related to the informational function of accountants, disclosure of said financial information through financial statements or similar documentation can aid the function of the individual or financial entity in a myriad of ways.
Most often, the release of financial information concerning the accountant’s client is done in order to aid in the filing of taxes towards a governing body, or in the event of a creditor assessing the risk profile of releasing a loan to said individual or entity.
Accountants are also responsible for the disclosure of internal financial information to such individuals like external investors, certain executives within the entity, beneficiaries of an estate – in cases of estate accounting-, and even in compliance with the procedures of forensic accounting.
Legal Assurance Benefits
In the unfortunate event that an individual or entity is brought into a court of law, financial evidence may be used to either defend or prosecute said individual or entity, with accountants being the primary personage responsible for the interpretation and disclosure of said financial evidence.
In a large number of legal jurisdictions, certified accountants can be held legally liable for any failure on their part to notice discrepancies or misstatements in the financial information of an individual or entity, whether intentional or not.
As such, corporations that hire an accountant can provide some level of legal protection to themselves by doing so.
Taxation and Crediting Benefits
Accountants may act in both an executive and advisory capacity to both lone persons and financial entities in the act of filing taxes or receiving tax returns.
While this is primarily done for lone individuals in the United States, it is a nearly universal requirement across the globe that corporations and other financial organizations disclose their financial statements to regulatory and governing tax entities.
As such, an accountant can not only compile and disclose information regarding taxation of their client but also provide information to creditors that may make said client eligible for loans or credit.
This can work in both ways with taxation related entities and creditors utilizing accountants in order to interpret and analyze the financial statements disclosed by the entity or individual in question, allowing them to certify whether the information found therein is in line with other evidence said accountants come across.
Economic and Asset Appraisal Benefits
Considered a specified field of accounting, the appraisal of assets, corporations and various other financial articles is a primary function of accounting that acts as the backbone behind a large volume of business decisions, especially of the more aggressive sort.
Whether a corporation is seeking to expand their reach, diversify their products, or an individual wishes to alter the composition of their financial portfolio, it is best to first consult an accountant so as to ensure that it is the wisest decision to make, as well as to formulate a plan certified by an experienced professional.
References:
1. Burchell, S.; Clubb, C.; Hopwood, A.; Hughes, J.; Nahapiet, J. (1980). “The roles of accounting in organizations and society”. Accounting, Organizations and Society. 5 (1): 5–27. doi:10.1016/0361-3682(80)90017-3
2. Swanson, Edward (2004). “Publishing in the majors: A comparison of accounting, finance, management, and marketing”. Contemporary Accounting Research. 21: 223–255. doi:10.1506/RCKM-13FM-GK0E-3W50.
3. 2018 Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements, The International Auditing and Assurance Standards Board, December 2018
4. Scott, William R. Financial Accounting Theory. 7. ed, Pearson, 2015.
