What is accounting?
Q: What is accounting?
A: Accounting is the job of sharing financial information about a business to managers and shareholders. It is also known as the "language of business".
Q: Who are accountants?
A: Accountants are people who do accounting, and also carry out the auditing or checking of a company's books and records. In Britain, this auditing is often carried out by a qualified person called a "chartered accountant". In the United States, the professional designation is Certified Public Accountant or "CPA".
Q: What do accountants do?
A: When accountants do accounting work, they write in the books of account (ledgers) that belong to a company. Every time money is spent or earned, it is written in the ledger. The information in the ledger is used to prepare the company accounts monthly, quarterly (every three months) and annually (every year).
Q: What does an annual report show?
A: An annual report shows what money the company has taken in over time and what it has spent money on. It also shows if the company made a profit in the year (if it made more money than it spent), who owes the company money, who the company owes money to, and any big expensive items that have been bought which they expect to use for many years.
Q: Who looks at these annual accounts?
A: Lenders, managers, investors, tax authorities (the people who collect taxes for government) and other decision-makers look at these annual accounts. Managers and investors look at them to make decisions about how to spend money in future while lenders like banks look at them before lending any amount of money to companies. Tax authorities check if companies are paying correct amount of taxes from their income through these reports.
Q: How often are these accounts prepared?
A: These accounts are prepared monthly, quarterly (every three months) and annually (every year).
