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Accounting is a well known term. Since every organisation will definitely have accountants and accounting is taught in schools, everyone has heard of this term. However, how many of us know what an accountant does day to day and what their line of work entails? If you would like to know what is accounting and if a career as an accountant will suit you, this article will give you all the information you need.
Accounting Definitions
Accounting is a broad field. Therefore defining it is no easy task. Lets look at a few definitions in order to understand accounting better.
A. W. Johnson: “Accounting may be defined as the collection, compilation and systematic recording of business transactions in terms of money, the preparation of financial reports, the analysis and interpretation of these reports and the use of these reports for the information and guidance of management.”
Bierman and Drebin: “Accounting may be defined as identifying, measuring, recording and communicating of financial information.”
Accounting Standards Council (ASC): “Accounting is a service activity. Its function is to provide quantitative information, primarily financial in nature, about economic entities, that is intended to be useful in making economic decision.”
American Institute of Certified Public Accountants (AICPA): “Accounting is the art of recording, classifying and summarizing in a significant manner and terms of money, transactions and events, which are, in part at least, of a financial character and interpreting the result thereof.”
All these definitions put together provides a comprehensive explanation of what is accounting. They use many words with similar meanings:
- Collecting, compiling, recording - means gathering relevant financial information according to the specific role in accounting.
- Analysis, interpretation - these words indicate that the previously gathered financial information is analysed to gather relevant data and turned into reports
- Communicating, information, guidance - The reports or information is communicated to the management or relevant parties to serve as guidance to make decisions.
Responsibilities of an Accountant
The main responsibilities of an accountant in general is to compile, analyse, verify and prepare financial records for the business organisation. In simple terms, accountants work with financial documents in order to ensure lawful and ethical business practices.
Their role is spread across many areas in the financial sector such as taxation, financial reporting, forensic accounting, corporate finance, auditing, business recovery and insolvency, or accounting systems and processes.
The area of business accounting you choose to pursue depends on your interest. Just keep in mind that all areas of accounting is governed by the generally accepted principles of accounting.
Some of the common tasks of a qualified accountant include:
- Preparation of financial reports
- Provide guidance on cost reduction, revenue enhancement, and profit maximisation
- Management of financial systems and budgets using spreadsheets and accounting programs like Xero
- Ensuring financial documents are in order and compliant to the regulations
Here’s all you need to know about accounting.
Types of Accounting
Accounting can be divided into two categories which are financial and management. Let’s look at the features of these accounting types below:
Management Accountants
Management accountants focus on analysis, interpreting and communicating the results to the managers of a company. The reports prepared by management accountants help the managers make informed decisions and meet the targets and goals set by their company. Unlike financial accounting, the main user for management accounting report is within the company like managers or Chief Financial Officer (CFO). For this reason, management accounting does not need to comply with local Generally Accepted Accounting Practice (GAAP).
Since the intended user is internal, information can be tailored to meet the need of the specific recipient. For example, information needed by a sales manager differs from a production manager when it comes to meeting their goals and targets. This is where management accounting comes in. Information can be tailored to meet the need of each manager.
Financial Accountants
Financial accounting, like its name is centered around the financial aspect of accounting. Financial accountants mainly deal with recording and reporting activities resulting from a company’s day to day operation over a period of 12 months usually. The main user of financial accounting are regulatory bodies and third parties. This is why financial accounting has to follow the local GAAP set by the relevant accounting bodies. This is to ensure that the information provided is sufficient for multiple users.
For example, for a company to obtain a loan from a financial institution, it must present its financial accounts for the bank to decide whether to approve the loan request. Similarly, under Malaysian law, a company should submit its audited financial statements to the Suruhanjaya Syarikat Malaysia (SSM) on a yearly basis. An investor can make an informed decision on whether to invest in a company based on its financial statements.
Different Roles in Accounting
From the definitions of accounting above, it is clear that accounting is a broad field. Accountants play many different roles with different job titles in many areas of business.
See the list below for some of the most common accounting job titles, some of which you may have heard of if you are working towards an accounting course or other relevant accounting qualifications and some you may not have known existed!
Bookkeeper
This role does not necessarily require degree qualification. The job involves keeping records of all financial transactions, monitoring accounts received and paying all bills incurred by the business.
Tax Accountant
A tax accountant ensures that the business is in compliance with the correct tax regulations when filing annual accounts and is submitted before the deadline. They also offer strategies to minimise the tax amount paid.
Forensic Accountant
Forensic accountants can be considered as the detectives of the accounting world. Their job involves investigating inconsistencies, missing information, frauds and even embezzlements in the financial records.
Auditor
Auditors are known as the accuracy expert of the industry. They examine the financial records and systems for weaknesses and if there is room for improvement. Auditing can be divided into external and internal. Internal audit is done to ensure the effectiveness of the accounting process while in an external audit, the business shares its records with third party to ensure that they adhere to the relevant accountancy standards.
Tips on Securing an Accounting Job
Are you looking for a job in the accounting line? Or are you still studying an accounting course and are interested to find out about your future job opportunities? Whatever your motivation is, here are some tips if you are considering a career in accounting.
Brush Up Your Skills
If you have completed an accounting course and and have just started looking for a job, you are equipped with accounting knowledge and skills. In addition to this, you will need a number of other skills.
It is essential to have good communication skills because accountants are required to communicate with clients. This is a critical part of the job. Furthermore, you are required to be diligent and detail oriented to keep up to date with the accounting regulations which changes regularly. You will need to reflect those changes in your work.
Adaptability and flexibility is also vital skills as there are many technological changes involved in accounting. There will be many technological changes like better software and use of artificial intelligence in this line of work. You must be able to adapt and move forward with the changes.
Be Prepared to Work Your Way Up
Similar to other careers, you cannot start work in your dream position. You have to start with an entry level position and work your way up to reach your ultimate goal.
It is good to have a plan before you start. Think about what field of accounting you are interested in. Is it audit, tax or something else? This will lead you to look for suitable positions. Whether it is an internship, entry level position or higher, always look back to your goals before accepting a new position or role.
Accounting is more practical than theoretical where you learn best by actually doing it. Therefore, learning on the job may be the quickest way to gain the skills you need rather than going through apprenticeship and other study schemes, however, it all depends on what your future employer is looking for in terms of skills and education.
Getting Qualified to Work in Accounting
You need at least a diploma or AAT (Association of Accounting Technicians) qualifications as a minimum prerequisite qualification to be work in thing accounting line in Malaysia.
However, in order to become a qualified accountant, you need higher qualifications. If you have completed Sijil Pelajaran Malaysia (SPM) for those who have attended public school or O’levels for those who attended international school, you will need to take a pre-university course such as A-levels, STPM or a foundation course. You can proceed to a Degree in Accounting with this qualification. Alternatively, you can complete Diploma in Accounting. This will enable you to pursue a Degree in Accounting, going directly to Year 2.
Once you've got your degree, you can go on to pursue any professional qualifications and certificates like ACCA or CIMA to name a few.
There is also an option to pursue professional qualifications directly after completing SPM or O’levels. For ACCA, you can take the ACCA Foundation in Accountancy (ACCA FIA).
If you need help with your exams, search for an accounting tutor on Superprof!
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