Question

What challenges of accounting are the most intimidating? What is the value of knowing and understanding accounting in the business world?

Answer 1

Challenges for accounting can be enumerated through following points.

1. Accounting needs understanding of one's business as well as business environment. It is an inflexible framework that accountant must understand and fit into the company's unique experiences.

2.To undertake the accounting procedure inside an organization the company must design new procedures,which requires large financial investment that includes employee labour cost,system upgrade and employee training.

3. Accounting can keep an eye on the financial aspects of any company but cannot say about the qualitative aspects of an organization. The balance sheet cannot say how the work environment exists inside a company.

4.The accounting data ignores the concept of time value of money as we consider in finance.

5.Tendency for secret reserves by increasing or decreasing assets and liabilities for which total financial picture of an organization is not reflected.

6. No uniformity for comparison as there exists application of alternative methods of application of accounting policies. Valutation of stock can be done at market value or net realisable value.

7. Tax evasion is also facilitated through accounting enteries.Black money is diverted through channels of enteries converting it in hard earned money.

8 secrecy cannot be maintained as there is involvement of many employees in the accounting work

9. Accounting has a major limitation of following the generally accepted accounting principles which don't have a unifrom base . Application of IFRS is a recent intimidating issue for indian accounting.

10. Accounting needs maintenance of records manually as well as electronically which becomes a burdensome work to maintain registers and regularly have a backup of data.

Benefits of understanding and knowing accounting in business world

1. Management can take wise decisions in respect of determining selling price, deduction of cost, increase in sales etc.

2.The correct purchase consideration of a business can be ascertained by evaluating the assets and liabilities of business.

3.These financial statement s can help us to expand our business. Financial institutions help us to raise loans on the basis of profitability of our business and our capability to repay back the loan.

4. An understanding of accounting helps us to evaluate the risky areas of our business and plan for the better business deals.

5. Our accounts can alarm us about our future contingent liabilities and accordingly we can plan for our rescue.

6. The evaluation of assets and liabilities give a true and fair view of our business . In order to track our business knowlege of accounting is must.

7. Accounting help in compliance of law like income tax,Gst ,custom tax etc. The law requires periodic filing of returns which requires the knowledge of accounting.

8.Maintenance of records help in tracking end use of cash and the source of procuring it. Cash embezzlement can be traced even after years if we have a better understanding of accounts.

9. Any business requires advertisement . These financial statements provide information to the investors ,government, customers, shareholder's who in return read our financials and invest in our company.

10. Understanding of accounting help to compare performance of our business with others in same industry as well as different industry which help us analyse changes.