Many famous writers of Accounting of the world have regarded Accounting as the language of business. Man expresses his feelings through language in written and verbal form, similarly, various information of the business organization are expressing and presenting through accounting statements. Also learn, What is Accounting? Why is “The Language of Business” also called Accounting?
Here are explain, Why is “The Language of Business” also called Accounting?
In language, efforts are made to express a particular feeling using words one after another. Similarly, in accounting, financial transactions are recorded in books of accounts and there from preparing financial statements various financial information are communicated to concerning the persons.
Accounting furnishes all information about past events, current activities and future possibilities of a business. Recording and analyzing past and present financial events, Accounting presents and communicates various information in the form of statements and reports to the interested parties like owners, employees, management, investors, buyers, sellers, etc.
These financial statements are meaningless to those who do not have knowledge of accounting, in the same way as the newspaper is a bundle of papers to an illiterate person. So, Accounting functions like a language. One may think it is not apt to compare Accounting with language but actually, it is not so.
Shorthand is a language but the persons who are ignorant of it cannot understand this symbolic language. Similarly, it is not illogical to term accounting as a language of business. It is meaningless to those who are ignorant of this discipline. No language in the world is universal. Similarly, accounting language also is not understandable to all.
With the changes in society and human life languages are changing. Similarly with the advancement and complexity of business accounting language is changing gradually. Therefore, it is apt to say, Accounting is the language of business.
Accounting as the “Language of Business”!
Accounting is the analysis and interpretation of bookkeeping records. It includes not only maintenance of accounting records but also the preparation of financial and economic information which involves the measurement of the transaction and other events pertaining to a business.
To operate a business profitably and to stay solvent, the profitability and solvency of a business should measure 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.
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 using to represent the 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 a 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.
We express ourselves through our language. Similarly, the results of the activities are expresses through accounting with the help of financial statements. Accounting measures the performances of the business, that is, profitability and financial position. Thus, the language of accounting expresses the whole story of the undertaking through the various processes of accounting. The progress of the firm can easily compare and seen with the help of various accounting data.
Definition of “Language of Business”!
Accounting is knowing as “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 accepting principles of accounting to the practical field of business in order that income and financial position may state fairly.
Yuji Ijiri, observes “As the language of business, accounting has many things in common with other languages. The various business activities of a firm are reports in accounting statements using accounting language, just as news events are reports in newspapers, in English or another Language”.
From these accounts, statements, and reports, parties concerned can evaluate their success-failure, financial solvency -insolvency, etc. Of course, having sound command over accounting language one can understand this information.
To express an event in accounting or in English we must follow certain rules. Without following certain rules diligently, not only does one run the risk of misunderstanding but also risks a penalty for misrepresentation, lying or perjury. Comparability of statements is essential to the effective functioning of a language whether it is in English or in accounting. At the same time, language has to be flexible to adapt to a changing environment.”
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