Importance of Accounting Concepts
The most important aspect of any business venture is a simple understanding of the prevailing concepts that could curtail the smooth operations of the business as a going concern. Accounting concepts and principles play a pivotal role in the affairs of a business. There must be a mechanism to understand all the debits and credits of a given company operations. As a good business manager, one should be in a position to ensure that they understand the simple tenets in accounting and finance because a simple mistake could take the entire company down the drain. The most important and simple issues that a manager ought to understand are: knowing that any business is an entity that is distinct in nature, reliability, relevance, going concern, materiality, fair representation, timeliness and disclosure. Once one has a grasp of the accounting knowledge, it will be simple to progress on the career ladder with a great deal of focus. Through the same path, experience could be gained nonetheless.
Accounting practice entails the identification, measurement, and the communication of the economic-bound information which allows informed judgement and the basics of decision making by the rightful stakeholders. Accounting as a practice and profession, is charged with the responsibility of making records of the organization’s undertakings in a formalized way, by a certified accountant. Whatever the certified accountant does as a job in any given company, is a blessing for that company since the point of reference for most of the investors, is the financial statement that the man in charge of accounting prepares. In most of the organizations, the accounting assignment is designated for individuals with the requisite training or a department depending on the size of the company in question. The accounting function has played a pivotal role in the undertakings of any given organization since: they guide the general operations of a given company; offer a reference for the interested or prospective investors in the company’s shares; offering a record for the government in terms of meeting the statutory demands, among many other demands. On the same note, issues about finance and accounting must operate under a set of principles that are standardized world over.
For these principles to be accepted and embraced in this setup, they are supposed to be objective, reliable, usable, feasible and always comprehensible in the areas of finance. A good accountant should therefore have a wind of the following accounting principles: business entity concept whereby the owner and the business cannot be treated one and the same. Secondly, the concept of measurement of money, thirdly, the dual aspect concept, the going concern concept, the concept of cost, the accounting year concept, the matching concept, and finally the realization concept. The rewarding nature about following the basic principles of accounting is that so much would be saved in terms of time, finances, energy and effort. There will be a great deal of professionalism in the accounting assignment that one is allocated.
For a sustained growth of any business as a going concern, there should be greater adherence to the principles of accounting because they serve as the yardstick for measuring the success. Professionalism is what makes most of the businesses to thrive in this volatile and dynamic business environment. Accounting together with its principles should be the stepping stone for a successful venture in business.