To many people’s mind, accounting is a boring job by sitting in front of computer crunching with numbers.
Before studying and working in accounting field, I had the same thought.
However, I changed my thought after two decades of study and work in it.
Accounting contributes much higher value to an organization than what I thought before and it plays a very important role in an organization, no matter it is in commerce, government or charity.
Why studying accounting is a must
Accounting is an old subject. The very oldest known written documents, from Mesopotamia, are trade records. That’s accounting. Why this old subject is so important that you must know?
One of the greatest investors in modern world, Warren Buffett, gave a speech in an university explaining how to be successful in investment.
He said, “Accounting is a language of business. You need to understand the language so that you understand of the business.”
Warren Buffett talks about the importance of accounting
If your goal is to be a successful investor, Buffett’s statement is the golden principle to you. Even you don’t have the goal as an investor, accounting knowledge is still important to different roles in an organization.
The goal of a salesman is not only selling as much as possible but also ensuring the sales are profitable.
A marketing professional needs accounting skills to measure a campaign’s return on marketing investment.
Human resources administrator has to possess basic accounting skills in working payroll to ensure all staff are paid properly.
In addition to having great products, a startup entrepreneur has to control all running costs so his business can be sustained before customers buy his products.
All these examples show accounting skills are required in different roles to perform their jobs.
What is accounting?
As described above, accounting is not only recording an organization’s transactions but also serving a language of business. It is a way of communication of an organization financial status at a snapshot, i.e. the balance sheet, and the financial performance at a specified period, i.e. the income statement (or Profit & Loss Account) and cash flow statement, to all parties interested in the organization’s business.
The balance sheet, income statement and cash flow statement are called financial statements. Preparing financial statements is one of key roles for accounting function in an organization.
To facilitate the understanding of financial statements across different businesses, all accounting has a standard set of accounting principles. It is called Generally Accepted Accounting Principles, or GAAP.
Though GAAP is not in the law, organizations have to follow in preparing the financial statements when they are used by banks for demanding operation funds, government or auditor.
Accounting career path
After sharing how important of accounting in business world, you may have a question on whether accounting is an option in your career and what’re its prospect.
However, I would like to share with you the key elements to be success in accounting before outlining accounting career prospect. If you believe your strength meets those elements, you can consider accounting as your career.
The first element is number skills. Accounting is not rocket science. Number skills mean you are not afraid of working with numbers and have a skills to interpret the numbers in words or graphs.
Next is willingness to learn. Though accounting is old subject, it is still developed with the change of our business environment and landscape. Continuing learning is one of the key characteristics of accounting career development.
Last element is communication. I work with many accounting staff in my life. I saw one element that causing an accountant struggling in his or her career is communication. Some accountants enjoy communication within the same department but are not willing to communicate with staff in other department. In an organization, accounting department is the only function that is good at interpreting the numbers to others. It is a value-added role to a company that many appreciates.
If you possess all these elements, you should find accounting fits you well.
According to U.S. Bureau of Labour Statistics published in 2019, number of jobs in accountants and auditors will grow 6% from 2018 to 2028 which is faster than the national average rate. The median of annual salary is US$70,500, significantly higher than national median at US$38,640.
Generally speaking, accounting career can be categorized in
1) auditor or public practice;
2) employed by commercial companies;
3) working in government departments.
Let me briefly explain the career ladder for public practice and commercial companies.
Public practice is one of popular paths for all accounting fresh graduates. Being an auditor or tax consultant in a professional accounting firm, the job is to perform statutory audit work (auditor) on the client’s financials or assisting client’s tax reporting (tax consultant) is compliance with law.
Why do I say it’s popular?
It’s because the job experience and exposure gained are very valuable in future career development. In addition, some professional firms offer training and resources to its staff to help them to pass professional accounting exam which are the dreams of many young people.
The career ladder in public practice is relatively simple. You start as a junior accountant, once you are qualified as a member of your country accountancy institute, you have more opportunities to be promoted and ask for higher salary.
In five to seven years, you would be a manager in charge of different assignments.
There is no minimum of years of experience as a partner in professional firm, but ten to twelve years is generally found.
Accounting is not only limited in preparing financial statements. Working in commercial companies, your accounting career is not only in financial statements preparation but also on developing your commercial finance skills such as account receivable management, inventory management, profitability control, treasury operation, taxation, internal controls and corporate governance.
Opposite to public practice, the accounting career ladder in commercial companies is more complicated. You start as a junior accountant and pursue your professional accountancy exam.
Once you are qualified as a member in your country’s professional accounting institute, you have much more options in promotion.
You can be promoted as accounting manager, or switch to finance manager to look after financial analysis and planning, or work as internal control manager to ensure high standard of governance is in place.
Many financial controllers or Chief Financial Officers (CFO) worked in various functions in accounting department before they are promoted. Many of them have more than fifteen years to be promoted as the head managing accounting department.
Reasons to study an accounting degree
The accounting career looks nice to you and now you consider how to be an accountant. The first and most important factor in your consideration is how much of your salary after graduation and the future salary growth with professional accounting qualification.
Given you are a fresh accounting graduate in UK and pursue your study in ACCA qualification, your salary is probably at GBP40k per annum based on a salary survey conducted by Robert Walters, one of UK-based international recruitment company.
After qualification, your salary range can jump as high as GBP55k.
Next question from you is whether accounting job will be replaced by robot or “Artificial Intelligence” (AI). Now, it cannot be completely replaced by artificial intelligence (AI). Instead, accountants play an important role in a company as an advisor and no more crunching numbers.
As stated by Jonathan Gass in Forbes, ‘The accountants and operators who choose to partner with AI will have to rethink how they oversee mundane services performed by junior staff. The saved time, however, will allow those financial professionals to become better positioned as advisors. ‘
In recent years, big data and data analytics jobs are growing very fast. Accountant is one of the most suitable candidate for these roles as –
Accountants have outstanding technical skills.
Accountants are natural-born problem solvers.
Accountants see the larger context and business implications.
Accountant’s role, with big data and data analytics, is now to help businesses finding valuable financial insights, identify process improvements and managing risk better. Wendell Gilland, Associate Professor at UNC Kenan-Flagler Business School, comments “accountants will be increasingly expected to add value to the business decision making within their organizations and for their clients.”
Last but not the least, everyone needs accounting and the demand is always constant, no matter which businesses or industries, thus creating job security whenever the economy is good or bad.
U.S. Bureau of Labor Statistics (BLS) unemployment rates by occupation report shows the jobless rate for accountants and auditors was 1.4% in the fourth quarter of 2019, which is much lower than the national unemployment rate 3.5%
In other words, the market demand for accounting professionals is constantly higher than the average demand in job market.
What do you learn in an accounting degree?
If you decide to pursue your bachelor degree in accounting, you are probably interested on what you learn from it.
Core subjects are financial accounting and management accounting. Financial accounting concerns the prepare of summary, analysis and reporting of financial transactions related to a business to senior management and external stakeholders. Management accounting is to provide financial information relevant to business performance and control to internal users.
In addition, accounting is often studied alongside other subjects such as finance, law and taxation. Accountancy is an interdisciplinary profession across various functions, i.e. finance, law and taxation.
Accounting Professional Qualification
You can be an accountant with an accounting degree. However, becoming a licensed CPA (Certified Public Accountant) that reap big rewards in your career.
As shown in the salary table above, the salary of a qualified (or licensed) accountant jumps significantly (15%+).
In United States, the requirement to become licensed CPA (i.e. AICPA) is having a bachelor degree with 150 semester hours, passing the uniform CPA exam and having work experience in a CPA for 1 to 2 years, subject to different states’ jurisdiction.
If you don’t have a bachelor degree, you can still have the professional qualification in other countries. For example, the accounting professional associations in United Kingdom (e.g. ICAEW, ACCA and CIMA) offer various route to the qualification though you are not graduated with a degree.
But for all these professional associations, the requirements to be qualified include passing their exams and having several years (subject to different association) working experience.
In this article, I share to you the basic information about what is accounting, reasons to study accounting and the career in accountancy.
If you would like to know the business language in your work or investment, taking a short accounting course can help you to meet your objective. Here you can check what courses are recommended.
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