I am here to discuss about the purpose and objective of the accounting and corporate governance with their importance for the companies. Also I shall express my opinion about the importance and integrity of an accountant along with the technology's impact on the accounting profession.
History of Accounting
Before 1494 there existed barter system [exchange of goods to goods] and following the decades single entry system [one-sided entry or bare-essentials] evolved. But it is only in 1494 Luca Pacioli is the first Venetian merchant who described the double-entry system of bookkeeping. Though recording of business transactions exist in the past but Pacioli is the one who was the first to describe the terms debit, credit, journal and ledger account which serve as the basis till date. (www.investopedia.com)
"the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of information!" (American Accounting Association)
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"Accounting is the language of business." (Instructor CTU).
In my opinion Accounting may be described as a process of keeping track of whole set of operations or transactions that take place in the business [individual too]. Quantified measuring of these transactions is done in the monetary terms.
Objective and Purpose of Accounting explained
"Accounting does not exist for its own sake but for the services which it provides to society. It does not end with the recording of business transactions and events. It also reports the result of these activities to all interested parties. Accounting, through reports enables management to organize business smoothly and efficiently in such a way that all wasteful elements are eliminated and better results are achieved. It may be said, therefore that the primary purpose of accounting for a business enterprise is to provide management with the information needed for efficient operation of that enterprise." (Business Education blogspot for bstudents)
Finally to me, the objective and purpose of accounting may be summarized as follows:
Decision Making: To provide information which is needed to make sound economical decisions and to understand the risks involved.
Financial Position: To prepare various reports using GAAP guidelines that provides information about the entity's performance to the users both internally [accountants, auditors, management etc] and externally [investors, creditors, tax authorities etc] for a particular period of time, generally a year.
Corporate Governance explained
"The relationship between all the stake holders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy and rule of law. Ethical companies are said to have excellent corporate governance. (www.investopedia.com)
"Corporate governance refers to the structures and processes for the direction and control of companies. Corporate governance concerns the relationships among the management, Board of Directors, controlling shareholders, minority shareholders and other stakeholders. Good corporate governance contributes to sustainable economic development by enhancing the performance of companies and increasing their access to outside capital." (www.ifc.org)
Now I strongly feel that corporate governance may be described as the set of systems, principles and processes by which a company is governed. They serve as the guidelines as to how a company can be directed or controlled in order to achieve their goals and objectives. Also corporate governance is based on principles such as conducting the business with all integrity and fairness with regard to all transactions, complying with all the laws of accountability, responsibility towards the stakeholders and commitment to conduct the business in an ethical manner.
Importance of Corporate Governance in the Companies
All the organizations must practice Corporate Governance for the smooth flow of transactions. Importance of corporate governance may be summarized as follows:
To ensure smooth flow of the business transactions.
To know the integrity of the company.
To source capital at reasonable costs.
To protect the assets of the company.
To maintain accounting standards with valid checkpoints.
To segregate the duties efficiently.
Importance of Accountant's Integrity
I would say Accountant Integrity is none other than an honest accountant in an organization. As an accountant is primarily hired to track the flow of money or money related transactions in an organization. They also organize, aggregate and generate financial information to the stakeholders. Though the person holding accounting knowledge is important for an organization I feel having integrity is much more important. When Accountant maintains integrity in an organization he would certainly have the highest responsibility in providing good quality of service. I would also say that acquiring and possessing knowledge is easier than acquiring and possessing integrity. Hence I would strongly feel that an Accountant's integrity is an asset to an organization.
Impact of technology on the Accounting profession
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The impact of technology is affecting the way we are doing the business where quality and quantity aspects, customer satisfaction and innovation have become the most important components in an accounting profession. They can also be explained by taking the following points into consideration:
Technology has greatly changed accounting by reflecting the present trends of shifting from obsolete quantitative approach to a qualitative enhancement i.e., from manual to automation.
Software such as Microsoft Excel plays a vital role in the accounting for an organization. It is said to be a perfect blend that fills the gap of communication between the accountant, accounting and organization in implement the right reports and to the accountant being user friendly.
The Internet which is the most efficient tool that acts as reference and dictionary to the present trend accountants and the organizations as a whole.
Cloud Storage may be defined as the large storage area provided by the third parties to increase the performance of the entities. This is the evolving technique emerging these days where in it is helpful in storage tasks like backup and providing immediate accessibility of the resources and applications used in the company.
I feel that the purpose and objective of accounting is to perform what it is ought to do in the business as per the GAAP guidelines. Corporate governance requires all the necessary checkpoints to control the overall activities in the business in an efficient manner. Accountant's integrity in an organization plays a vital role in providing the quality performance of the same. Also as mentioned that acquiring and possessing knowledge is easier than acquiring and possessing integrity. Hence I would strongly feel that an Accountant's integrity is an asset to an organization. The impact of technology is affecting the way we are doing the business where quality and quantity aspects, customer satisfaction and innovation have become the most important components in an accounting profession.