Question

Accounting can really be considered the “language of business”. What does this actually mean? With the increase of businesses being conducted internationally explain why it might be necessary to create an international accounting language. What would be the possible benefits and drawbacks of establishing such a universal business language?

Answer 1

Accounting is often called the “Language of business.” It is a means of communicating information about a business. Its responsibility is applying a thorough knowledge of the theory of accounting, that is, generally accepted principles of accounting to the practical field of business in order that income and financial position may be stated fairly.

Financial accounting is often called the language of business, it is the language that managers use to communicate the firm's financial and economic information to external parties such as shareholders and creditors.

To operate a business profitably and to stay solvent, the profitability and solvency of a business should be measured at regular intervals. For that, it is essential to know whether a business is earning sufficient profits or incurring losses and it has sufficient money to pay off debts. Accounting provides all these pieces of information which enable the management to guide the business on a profitable and solvent course.That's why it is necessary to create an international accounting language.

After analyzing properly the information supplied by the accounting statements, the users of the same take decisions for future activities. Since accounting supplies the necessary information, it performs, in fact, a service function and, at the same time, it is used to represent economic position of an entity. Therefore, it becomes clear that keeping of accounts is not the primary objective of a person or an entity.

On the contrary, the primary objective is to take decision on the basis of financial facts presented by accounting statements. Thus, the understanding of accounts is not the basic objective; it only helps to realize a specific objective. As such, accounting is not an end in itself but a means to an end.

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