Accounting: Definition, Functions, Objectives, Types of Fields, and Professions

Accounting may be a very familiar term for those of you who are in the business or office field. The term accounting is taken from the absorption of the English word "Accounting” which means to count. Often, accounting is written incorrectly into accounting, even though the word "accounting" is not a standard word.

Accounting as an umbrella for various types of bookkeeping such as: General journal, ledgers, adjusting journals, correcting journals, and many others are a very important backbone for a company's financial reporting. 

Meanwhile, financial statements The company is also very important because it affects almost all parties who interact with the company or stakeholders (such as investors, workers, beg, and many others). Therefore, accounting is very important for companies.

Accounting: Definition, Functions, Objectives, Types of Fields, and Professions

It is very important for you to learn what accounting is, especially for those of you who want to pursue a career in this accounting field. So, what exactly is accounting? This article will discuss the definition, function, purpose, types of fields, and types of professions of accounting activists. 

Understanding Accounting

Menurut Big Indonesian Dictionary (KBBI)Accounting is the art of recording and summarizing financial transactions. In addition, accounting also discusses the effects of financial transactions on the economic aspects of an entity or company.

Based on Weygandt, J. J et al (2019)Accounting is the activity of identifying, recording, and communicating economic events or transactions of an organization to interested parties. Weygandt, J. J et al (2019) underlined that in accounting, a financial condition report will adjust to each party who will read the financial statements.

For example, the company will report on the timeliness of paying taxes to government agencies. Meanwhile, the company will report the company's performance during one accounting period on stakeholder – other stakeholders – namely investors and workers. 

Accounting Function

Accounting has various functions that will facilitate the company's operational activities. The results of accounting activities – financial reports – will also become data that determines various important financial decisions in the company.

Well, what exactly are the functions of accounting? The following are the functions of accounting.

Helping Companies in Determining Forecasting Company

Forecasting is an activity that aims to predict or predict the future of an entity. By predicting the future, the company will find it easier to make decisions related to the company's future.

With accounting, companies can do analysis of financial data that the company had for some period prior to the current recording period. Therefore, the company will more easily determine how the company's financial condition in the future.

In addition, by recording various financial transactions, companies can predict the date peak –top– of the company. For example, the company has a core business in the field of fashion Muslim.

Incidentally, the company turns out to always experience a surge in demand a few days before Eid al-Fitr. WellBy looking at the data, the company can determine various attractive promos that further increase the public's desire to buy the company's products.

Helping to Attract Investors and Consumers

Accounting is an activity that includes the process of recording, making an overview (summary), reporting, and conducting analysis. With accounting, companies can be helped to attract investors and consumers. Well, How to?

Reporting activities in accounting have a major role in attracting investors and consumers. The company's financial statements will contain information about the company's performance, how much the company has made a profit and perhaps how much the company pays dividends to investors.

Through various information that is easily digested by various stakeholders such as investors and consumers through financial reports, accounting has an important role to attract the attention of these stakeholders.

Accounting will Determine the Ease of Loans

One source of funds that can be used by companies to finance operational activities is bank credit. Banks will usually do a credit analysis first on the company.

The bank will check whether the company is able to repay the loan along with the interest based on the financial statements. Through accounting, you can make good financial-related decisions because there is no recording of scattered transactions. 

Recording of Financial Transactions will Help Process Receivables Collection

In a business process, sometimes business people will meet consumers who make payments for products with invoices or with debt. The consumer will usually submit some kind of purchase order to business people. Well, this transaction will be entered in the company's accounts receivable account.

Accounting will simplify the process of collecting these receivables because all transaction data has been recorded in one particular account with detailed information on the consumer's name. In addition, if the receivables are not paid in full – but in stages – the company does not need to be afraid of the possibility of scattered records.

Adjusting journals will be able to help companies write down changes in the status of receivables from consumers.

Accounting Objectives

In addition to having many functions that can help companies in financial matters, accounting activities also have several purposes. The following are some of the objectives of accounting for companies.

• So that companies can provide valid information and in accordance with Generally Accepted Accounting Principles (PABU)
• So that the company can provide information that is relevant and easily understood by interested parties
• So the company can provide transaction information as quickly as possible (real-time)
• Accounting in the company also aims so that the company can always document financial transactions

Accounting Benefits

In addition to having several functions and objectives, accounting also provides several benefits for entities that practice it. The following are some of the benefits of accounting.

• With accounting, companies can present information about the company's financial condition to interested parties.
• Companies will record all their financial transactions through all activities in accounting. With these records, the company will have financial evidence that can be used for the audit process and used as evidence of transactions that can be accounted for.
• Through accounting, companies can see about how the company's performance in several previous periods. Well, the historical data can be used by the company for decision making financial in the future as well as evaluation material.
• Besides being used in companies, accounting principles can also be used in personal financial management. Recording daily expenses and income with a general journal can make it easy for you to manage your finances and savings.

Type of Accounting Field

Like many of the other skills, accounting also has a field or specialization that will make working within a company more effective and efficient. The following are the types of fields in accounting.

Accounting Auditing or Inspection

Accounting type auditing or what is often abbreviated as auditing is the field of accounting that discusses the examination of existing financial statements within an organization in an accounting period.

The main purpose of the audit is that reports that are informed by the company to external parties will be more reliable and accountable. In the process of auditing the company's accounting, it will be very important to pay attention to the objectivity and independence of the auditor (financial data examiner).

Financial Accounting

The field of financial accounting is a field related to the accounting of an economic unit – both individuals and organizations – as a whole. The main objectives and activities of financial accounting include financial recording activities with a view to presenting financial statements.

Tax accounting

The field of tax accounting is concerned with determining the tax object of the company and calculating the amount of the tax to be presented in the form of financial statements.

Specialists in the field of tax accounting need to know the articles that regulate tax matters. This is because tax accounting will relate to company decisions in the field of taxation.

Cost accounting

Another type of accounting field is cost accounting. Cost accounting as the name suggests is related to recording various costs – both operational and non-operational costs – that exist in the company so that the company can make various product-related decisions more efficiently, effectively, and of course profitable.

In cost accounting, you will usually learn about various methods for allocating costs to companies. One method of determining cost that is well known for its accuracy is Activity Based Costing (A B C).

Management Accounting

Management accounting is a type of accounting field whose financial data is intended for the company's internal parties, especially the management who makes essential decisions for the company.

Some of the benefits of management accounting include management accounting data that can be used for managing company activities, monitoring cash flows in and out of the company, and making important decisions for management.

Budget Accounting (Budgetary Accounting)

The type of budget accounting field or what is more often called budgetary accounting is a field of accounting that focuses on processing historical data from the company and then the data is used for the purposes of planning the company's budget.

Budget according to KBBI is defined as the estimated future cash expenditures and receipts of the company. The main function of the accounting field is of course so that the company can know the company's financial condition in the future and be able to determine policies in accordance with these financial conditions.

Government Accounting

As the name suggests, corporate accounting is a field of accounting that is concerned with recording, reporting, and summarizing financial transaction data at government-owned institutions or entities. This accounting field is expected to be able to present financial reports as well as control and supervise financial data from the state.

Banking account

Banking accounting is an accounting field that is closely related to the management (recording and reporting) of financial data from banking institutions. This data will later be processed so that it becomes information that will be used to meet the needs of stakeholders, both internal and external to the company.

Accounting System

Accounting system is a field of accounting related to how to record accounting effectively and efficiently. The accounting system sector will provide rules on how to arrange documents up to the procedures for recording financial statements.

Accounting Profession

The profession in accounting so far has four main professional fields, namely public accountants, company internal accountants, government accountants and educator accountants. However, nowadays more and more professions specialize in the accounting profession that can make the company's work more effective and efficient.

The following is a brief description of the four main areas of the accounting profession:

• Public Accountant, is an accountant profession that acts independently in offering services to the public, especially to companies.
• Internal Accountant Profession, an accountant who works for a company.
• Government Accountant, accountants who work in government institutions such as the Supreme Audit Agency (BPK) 
• Teaching Accountant ProfessionUnlike the three professions above, which are more focused on accounting practitioners, teaching accountants are more focused on the teaching profession. For example, lecturers who teach about cost accounting, management accounting, and so on. 

Accounting is an activity that is very very important for the company. With accounting, companies can record financial transactions. The financial transactions will then be processed into financial reports and become crucial data for both internal and external parties of the company.

For internal companies, data financial statements will be used for various needs such as budgeting, projection and forecasting, as well as performance evaluation. Meanwhile, financial reports also provide massive benefits for external parties of the company.

For example, financial statements will be a compass that shows the direction of investors' financial decisions, whether investors might buy-hold-sell their shares. The financial statements will also become a document that determines how many items the company will buy to you beg.

Learning about accounting will help you in preparing financial data and reports. Well, I hope this article can help you to learn more about accounting!

Reference: 

Weygandt, JJ, Kieso, DE, Kimmel, PD, Trenholm, B., Warren, V., & Novak, L. (2019). Accounting Principles, Volume 2. John Wiley & Sons.