Why is Accounting Deemed as the ‘Language of Business’?

Accounting is a very important aspect in any business because it tells a lot about a certain company. It helps keep track of financial reports and the accountant will be able to tell the owner if their business is doing well or not.

Why, then, is accounting referred to as the “Language of Business”? I will cover that in this article, so do read further. And oh, by the end of the article, you will want to get accounting services in Malaysia and you will know why.

Analysis

Accounting information is always recorded with a strict set of rules. It contains all of the information about the company’s cash flow, expenses, business costs/operational expenses, and so much more.

The information stated in the financial reports is so important because it helps a business owner decide what moves to make.

For instance, a restaurateur may find that their business only peaks at certain months during the year. What will be the best way for them to continue doing business during off-seasons?

Because accounting information is created with real data, the owner can make objective decisions because they will know exactly what they are looking at.

Communication

A company’s accounting information tells outsiders how the business is operating. For example, potential investors might look into a certain company and might invest some of their assets in it because the accounting information tells them that the company has had great success recently.

Metrics that can attract potential investors include stock price, earnings per share, revenue growth, among many other variables.
A small business, for example, might be appealing to potential investors by looking at the aforementioned descriptors, thus providing additional funding for business expansion.

Interpretation

A company’s financial statements are always made in a systematic way. This makes it easier for external auditors to look into the company’s financial records and see if there is anything that is amiss.

Furthermore, the ones that created the financial statements will have full confidence that anyone, other than within the company itself, can look at if without any worries.

The reason why this is the case is that financial statements are made in accordance with what was set in the Generally Accepted Accounting Principles or GAAP. You could say that all of the information is standardized.

Accumulation

Accountants are assigned to look at the company in every level and they will record business activities that might have an impact on the business’ financials.

Double-entry accounting would dictate that every change in business records, such as in the cases of liabilities, assets, revenues, equity, or expenses, every transaction should be recorded.

Again, the entire process is systematic and is guided by the principles of GAAP. The information that is stated in the books can be used by the business owner to create meaningful decisions based on factual data.