Question

Write a 1 page paper discussing why business majors should study accounting.

Answer 1

Accounting deals with recording the financial transactions with a objective to get into the results of if a business is earning profit or loss. Based on that results one should make a decision of furher investing or closing down the business.

Business Majors are the persons dealing with the business like investors, promoters of the business, stakeholders of the business like shareholders, creditors or suppliers, customers, lenders, government agencies etc etc.

Business majors should study accounting because of the below reasons :

1) Investors in the business if they understand accounting , they could able to understand how the profit or loss is arrived , they could able to understand that though in the short run business not earning sufficient profit but in the long run the business may give huge profit.

2) Promoters of the business like individuals, partners in partnership business , joint ventures business etc etc wanted to know if it will be feasible to run the business in the long run and in order to understand that feasibility they need to understand the accounting and thus accounting terms to come a proper conclusion.

3) Shareholder of the business are the owners of the business to the joint stock companies , they provide the funds to the business at the early stage and also they are the persons who plays a greater role in moving share price higher or lower. Shareholders if they understand the accounting study the financial statements like profit and loss statement and balance sheet , and effective decision making if they would buy a company share or not and if they already purchased the share, then they will keep it in hold or sell.

4) Creditors or suppliers of the business are the persons who purchases the goods or services from the business, they need to know the accounting so that they could able to understand they will be getting the proper payments from the business on the goods or serviess they delivered.

5) Lenders to the business are the persons who provides money to the business with charging interest. So they need to understand the accounting to understand the sound financial position of the company.

6) Government Agencies like income tax department and various other tax agencies need to understand the accounting so as to undertand if the business is showing proper results and thus they are paying proper taxes or not.