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What is accounting?
While bookkeepers are specifically focused on recording day-to-day financial transactions, accountants are responsible for the entire process of recording, reporting, analyzing, interpreting, and communicating financial transactions and financial information related to a business, organization or individual. An accountant analyzes financial data, prepares financial reports, and makes recommendations to management on how to improve the financial performance and position of the entity. They must also ensure accuracy, consistency, and compliance with legal and regulatory requirements. And they provide advice on taxes and other financial matters.Footnote 1
There are two main types of accounting in business: financial accounting and managerial accounting.Footnote 2
Financial accounting is the process of recording, summarizing, and reporting financial transactions of a business to provide an accurate picture of its financial position. Financial accounting produces important financial statements such as the balance sheet, income statement, and statement of cash flows.
Managerial accounting is the process of analyzing and interpreting financial information to help management make business decisions about a number of critical functions, such as budgeting, cost control, and performance evaluation.
Accounting is important for businesses and organizations because it provides an accurate record of financial activities. It helps businesses track income and expenses, measure performance, and plan for the future. Accounting also helps organizations identify potential problems, such as cash flow issues and fraud, and take corrective action. The information and analyses that accountants provide is essential to both internal stakeholders and external parties such as creditors, investors, and tax authorities, who use the information to assess the performance and health of a business.
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Accounting course curriculum
While the curriculum for specific accounting classes or degree programs can vary, there are a number of accounting concepts that learners may be introduced to during their coursework, including:
Double entry bookkeeping: Double entry bookkeeping is the fundamental principle of accounting that requires every business transaction to be recorded in at least two accounts. This ensures accuracy and completeness in the accounting process.
Financial statements: Students must learn to prepare financial statements such as the balance sheet, income statement, and statement of cash flows.
Accounting equation: The accounting equation is the foundation of accounting and it states that assets are equal to liabilities plus equity.
Debits and credits: Debits and credits are used to record transactions. They must be in balance in order for the accounting equation to remain true.
Cost accounting: Cost accounting is the practice of allocating costs to products, services, and activities. It is important for businesses to accurately determine their costs in order to make informed decisions about pricing, budgeting, and other financial activities.
Tax accounting: Tax accounting is the practice of understanding the tax implications of different financial decisions and activities. It is important for businesses to understand their tax obligations in order to remain compliant with the law.
Internal controls: Internal controls are the processes and procedures that are put in place to ensure the accuracy and reliability of financial data. Internal controls help businesses prevent fraud, errors, and other potential problems.
Learners may also have the option of studying a more advanced degree or specialized topics including international accounting, financial modeling, equity valuation, and mergers and acquisitions. There are many different accounting courses and accounting programs available online, and some may even help you learn accounting for free. Explore the different educational options offered through edX and find the class that meets your specific learning objectives.
Explore accounting jobs
Accounting careers can lead aspiring professionals into a number of sectors beyond finance. Accounting is used in virtually all industries, including banking, construction, education, healthcare, hospitality, manufacturing, media and entertainment, real estate, retail, sports, technology, and transportation. Learners interested in the field should also consider the different types of accounting jobs that they can pursue, which include:Footnote 3
Tax accountants: These professionals specialize in preparing and filing tax returns, as well as providing advice on minimizing tax liability and maximizing deductions.
Management accountants: Management accountants analyze financial data to help businesses make decisions about their operations, budgets, and investments.
Auditors: Auditors inspect and review financial records and accounts to ensure accuracy and compliance with laws and regulations.
Financial analysts: Financial analysts use financial reports and data to make projections and provide advice for investments.
Forensic accountants: Forensic accountants investigate and analyze financial evidence for legal proceedings.
Government accountants: Government accountants prepare and file government financial reports and ensure compliance with government regulations.
Internal auditors: Internal auditors review financial documents and records to detect and prevent fraud and financial mismanagement.
Cost accountants: Cost accountants focus on analyzing, recording, and controlling costs associated with production.
Certified public accountants (CPAs): CPAs are licensed and certified to provide a wide range of services, including auditing, tax advice, and financial planning.
Personal financial advisors: Personal financial advisors offer advice on investments, insurance, and other financial matters.
How to become an accountant online
Depending on the job you choose to pursue, there may be different requirements in order to practice in different locations across the globe, such as licensing. And there are a number of jobs that benefit from understanding accounting and may even perform some accounting-related functions that do not require licensing. Entrepreneurs, for example, may want to study how accounting works to ensure that they are running their businesses appropriately.
But learners who want to become a licensed CPA will need to meet specific criteria which vary by location. The U.S. offers a good example of this. To sit for a CPA exam in the U.S., aspiring accountants will first need to achieve the educational requirements specific to that state which can include completing a set number of educational hours in certain subject areas.Footnote 4 Again, there are different requirements for each state beyond the number of credits earned; learners who wish to become licensed should review their state’s board of accountancy requirements.
Once they have met the requirements, aspiring accountants can apply, schedule, and take their exam, which will consist of four sections: Auditing and Attestation, Business Environment and Concepts, Financial Accounting and Reporting, and Regulation.Footnote 5 If they pass their exam, they can apply for a license in the state where they wish to practice. Similar to the process for testing, each jurisdiction has different licensing requirements, which can include a minimum number of hours of work experience in specific settings.Footnote 6
If your aim is to become a licensed CPA in the U.S. or in any other country, it is crucial to understand the different requirements of every stage of the process for the location where you intend to practice.
Learners interested in an accounting career path can explore how a bachelor’s degree in business or a master’s in business administration can help them build the educational knowledge to perform the functions of an accountant. Professionals in this field will need to hone a variety of skills including:Footnote 7
Computer skills: Accountants must be proficient in using accounting software, spreadsheets, and other computer programs.
Analytical skills: Accountants must be able to interpret data and make good decisions based on their findings.
Communication skills: Accountants must be able to communicate effectively with clients, colleagues, and upper management.
Attention to detail: Accountants must be able to double-check their work and catch any mistakes that may have been made.