Study Accountancy

A simple definition of an accountant might be a person in a role responsible for the accounting function of an organisation. There is no clear line to indicate when someone ceases to be a clerk or bookkeeper and should instead be referred to as an accountant.

Some examples of the type of work done by accountants are:

• Control over cash or bank balances.
• Ensuring that sufficient funds are available to pay bills as they fall due.
• Maintenance of financial transaction records.
• Preparation of periodic financial statements.

The above items are covered within the Financial Accounting section of this site. The following will be covered elsewhere:

• Preparation of budgets and comparisons of budgets against actual figures.
• Calculating the expected cost to produce an item.
• Calculating whether investments are financially justified.
• Minimising taxation liabilities.

Accounting records have been kept by societies going back thousands of years. The earliest known reference to double entry bookkeeping date from 1494 and remain in use today. More modern accounting techniques were developed during the Industrial Revolution, when larger concentrations of production began to emerge, especially within the textile and engineering industries.

The greater concentrations of capital required to run these larger organisations led to changes in the way companies were organised. The concept of limited liability was introduced in the 1840s, and was achieved by the establishment in company law of limited liability companies. Prior to this, a Royal Charter was required to set up a company. Examples include the East India Company.

Limited liability allowed investors to invest in a business with the guarantee that they could lost only the amount of money they had invested, rather than all of their assets. This allowed companies to raise capital from investors who were not interested in running the business on a day-to-day basis. Instead, the investors delegated their responsibility to a board of directors who were required to demonstrate their stewardship of the investors’ assets by preparing annual statements.

We use the term stakeholder to describe those interested parties who have a stake in the success or failure of a business. There are a wide variety of stakeholders and the information produced by the financial accounting function must be sufficient for all their varied purposes.

There are basically three functions of accounting: to record, analyse and summarise financial data. These basic functions are achieved through double entry bookkeeping, which is usually done using computerised systems. However, effectively communicating this information to stakeholders usually requires the services of a qualified accountant.