Understanding Accounting According to Experts, Functions, and Benefits

Accounting is a very broad umbrella term for various types of records such as: General journal, general ledger, adjusting journal, trial balance, and much more. The term accounting is not only about recording financial transactions.

Accounting includes the activities of recording, summarizing, and reporting financial data to interested parties. Because of the importance of accounting, business people need to it's so to know the meaning of accounting, its functions, and its benefits in business processes.

The following is an understanding of accounting with some expert opinions along with the functions, objectives, and benefits of accounting.

Understanding Accounting in General

Literally, accounting is a term that comes from English, namely "Accounting” which means to count. In addition, in the process of recording financial transactions, an accountant will identify these transactions into various "accounts" such as cash, accounts receivable, accounts payable, and many more.

Quoting from the Big Indonesian Dictionary (KBBI), accounting is the art of recording and summarizing financial transaction data and then identifying what these transactions will have an impact on an economic entity (both individuals and organizations).

Definition of accounting according to American Accounting Association (AAA) is the process of identifying, measuring, and reporting financial information. Meanwhile, the notion of accounting according to Financial Accounting Standards Board (FASB) is a service activity that has a function to provide quantitative or numerical information that will later be used for consideration of economic decisions.

Understanding Accounting According to Experts

In addition to knowing the general understanding of accounting above, you also need to know some understanding of accounting according to the following experts.

Baridwan, Z. (2000)

According to Baridwan, Z. (2000), accounting is a service activity with the function of providing financial information that can be used for economic decision making.

Harahap, SS (2005)

Harahap, SS (2005) states that the notion of accounting is a process of identifying, measuring, and delivering information about finance as information that will be used for interested parties. 

Munawir, S. (2005)

According to Munawir, S. (2005), accounting is the art of recording, classifying, and summarizing financial events as quickly as possible. Accounting is also concerned with interpreting the consequences of events financial it on the company.

Soemarsono, SR (2004)

Soemarsono, SR (2004) states that accounting is a process of identifying, measuring, and reporting financial information which is later expected to be a material consideration for users of the information.

Suhardjono, IB (2006)

According to Suhardjono, IB (2006), accounting is the art of recording, identifying, and summarizing transactions and events of a financial nature in a meaningful way and in units of money.

Suparwoto, L. (1990)

According to Suparwoto, L. (1990), accounting is a system in calculating the company's financial transactions and reporting the results of the calculation and management as information to internal and external parties of the company. The company's internal parties include management and workers. Meanwhile, the company's external parties include: beg, consumers, investors, trade unions, and creditors. 

Warren, CS, Reeve, JM, & Fess, PE (2005)

Understanding accounting according to Warren, CS et al (2005) is an information system related to the company's economic activities that will provide information to parties stakeholder (stakeholder).

Weygandt, JJ, Kieso, DE, Kimmel, PD, Trenholm, B., Warren, V., & Novak, L. (2019)

According to Weygandt, J. J et al (2019), accounting is the activity of identifying, recording, and communicating economic transactions from an economic entity to parties holding interests. 

Weygandt, J. J et al (2019) assume that the reporting aspect in accounting will adjust to those who read financial reports. For example, management accounting has a focus on informing financial data to internal parties, especially top management who will make essential decisions. 

Wilopo (2005)

According to Wilopo. (2005), accounting is identifying, measuring, and presenting financial information reports company, to enable clear decision making for information users.

Winarno, WW (2006)

Winarno, WW (2006) said that accounting is the process of recording financial transactions as well as processing and presenting the data so that it becomes useful information for the rightful and interested parties.

Accounting Function

Accounting has various functions that will facilitate the process of presenting the company's financial statements. Financial statements This information will be used as information and consideration for those who read it, especially those who have an interest related to the financial statements. 

Well, the following are the functions of accounting.

Attracting Consumers and Investors

Accounting more or less has a final stage process where the accountant will present a report on the company's financial condition. This financial report contains information that will later become a consideration for parties who have an interest in the company.

For example, when looking at the company's financial statements that show an increase in profits from the previous year. investors are willing to disburse more funds to the company. In addition, consumers are increasingly willing to spend their funds to buy company products when the company's image is known to be good.

DetermineCorporate Future Financial Planning

Through accounting, companies can carry out financial planning for the company's future. How to? Through the first point of the accounting function, we already know that accounting can help companies prepare projections or forecasts for the future.

Well, through this information, the company's management will be able to determine the company's future financial plans properly. For example, the company can determine peak and low season which will affect the more efficient management of performance and income and expenditure of the company. 

Helping Ease of Getting a Loan

The company's operational system will require large funds, even the company can also raise funds from external parties, either through investment asset products or through debt or credit.

When applying for credit, the bank will usually perform a credit analysis which will ensure the company is in good financial condition and able to repay their credit. Well, accounting has a role to ensure that the company's financial statements can be accounted for and the information can be presented to the bank.  

Helping Collection of Receivables from Consumers

A company sometimes provides payment options that will benefit both parties. One of them, the company provides a payment method by invoice or on credit.

With this, consumers can prepare funds no later than when the invoice agreement has reached maturity. In the world of accounting, debt from consumers will go into an account called receivables. Accounting has a role to help collect receivables from these consumers.

Accounting is an activity of recording, summarizing, and reporting financial transaction data in which the company is involved. With this record, the company will find it easier to track debt from anywhere that has entered maturity. 

Accounting Objectives

Accounting in addition to having various functions also has various objectives along with its application in the company. The following are some of the accounting objectives for companies.

• Through accounting, the company will be able to provide financial information in accordance with Generally Accepted Accounting Principles (PABU).
• With the existence of accounting, companies are able to provide relevant information for stakeholder or interested parties
• Recording transaction data in accounting allows companies to be able to provide information about financial data transactions in a timely manner real-time or quickly at that moment
• The company can always carry out recording documentation so that the company always has proof of liability documents.

Accounting Benefits

Accounting provides several benefits for its users, both for individuals and companies. The following are some of the benefits of accounting.

• Through accounting, companies can document all financial transaction data so that it can be evidence of transactions that can be accounted for, especially during the audit process.
• The company can provide information about the company's financial condition with interested parties
• Companies can conduct analysis related to the company's performance in several previous accounting periods. This historical data can be used by the company as a company evaluation of the company's financial policies in the future.
• Actual accounting principles can not only be used by companies. Accounting can also be used in everyday life. With this, you can do good financial management for your cash income and expenses. 

Accounting can be concluded as a process of collecting, recording, summarizing, and presenting financial statement transaction data to interested parties, which later the information will be used as a decision-making material. Well, that was an explanation related to the notion of accounting as well as the functions, objectives, and benefits of accounting. I hope this information helps you in the process of studying accounting!

Reference: 

Baridwan, Z. (2000). Development of accounting theory and research. Journal of Indonesian Economy and Business (JIEB), 15(4), 486-497.

Harahap, SS (2005). Accounting Theory, PT. Raja Grafindo Persada, Jakarta.

Munawir, S. (2005). Modern Auditing Book II. BPFE: Yogyakarta. Pg, 283.

Soemarsono, SR (2004). Accounting An Introduction. Fifth Edition, Books, 1.

Suhardjono, IB (2006). Banking account. Jakarta: Four Salemba.

Suparwoto, L. (1990). Advanced Financial Accounting I. Yogyakarta: BPFE Yogyakarta.

Warren, CS, Reeve, JM, & Fess, PE (2005). Introduction to Accounting Edition 25.

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

Wilopo. (2005). Complete Overview of Introduction to Accounting, Second Edition. FE UI publisher: Jakarta.

Winarno, WW (2006). Accounting information system.