Guide to Accounting for Kids and Teens
Accounting refers to the process of auditing, maintaining, and processing financial information. Every business relies on accounting principles to organize, maintain, and process financial dealings. The majority of businesses hire accountants, or people who specialize in accounting, to make sure their business's finances are updated and valid. In the sum of their responsibilities, accountants create financial reports and present them to managers, regulators, and stakeholders. Accountants who keep daily records of a business engage in a process known as bookkeeping. In short, accounting allows businesses and corporations to keep track of finances in the real world. People can also do accounting from home. All they need is a journal, pen, and pad to write down all of their earnings, purchases, and savings. Accountants do all of this and more, especially when tax season rolls around.
Accounting has its origins dating back to the start of trade and business. In fact, accounting came into existence as soon as trade and barter became a means of exchange between humans. Civilization understood the need to keep accurate records otherwise it could mean losing more than its share of goods and services. The earliest account of double-entry accounting did not emerge until Luca Pacioli, a Franciscan monk, transformed the business world. Business merchants and establishments saw the benefit of using double-entry accounting to help maintain accurate records. Its popularity and efficiency allowed it to grow to be one of the most widely practiced business standards today.
The field of accounting has advanced in other ways since the introduction of the double-entry standard, such as tax laws. Tax laws laid the groundwork for tax returns and tax audits. In their heyday, many lawyers argued that they should hold the responsibility for calculating tax returns and conducting tax audits. This changed once lawyers realized the difficulty involved in preparing taxes. As a result, accountants leapt at a very profitable opportunity to add to their practices. This created a career position known as the tax accountant within the industry. Other types of accounting are financial, internal, external, cost, and management accountancy.
The Great Depression also strengthened the role of accounting in today's modern business world. The crash of the 1920s resulted in the creation of stricter rules and regulations for businesses, including tax audits for corporate entities. These rules and regulations ensured that the corporations would hold themselves accountable for their financial dealings. In other words, accountants became the moral guardians for businesses. Accountants made sure to protect the general interest of the public, which restored consumer confidence in the business world.
Today, the field of accounting continues its role as a watchdog for the common investor. Unfortunately, many dishonest accountants have been hired by corporate executives who abuse their power. This happens because the accountants hired by these corporate executives do not want to lose their jobs. As a result of this dilemma, the field of accounting is scrambling to find a solution to promote morals in business dealings. It may take a while to restore balance in regulating, auditing, and policing corporate liability. In fact, corporate shareholders may need to find the solution to keep executives from abusing their power in the future.
Budgeting refers to the act of planning to save and spend within the restrictions of an individual's planned income. People at home can learn to budget to increase their personal savings. In order for businesses to stay alive, they must project income and expenses in order to remain in operation. Many business owners hire accountants to create a budget for each fiscal year. Accountants can create different budgets based on the needs of the business, such as the forecast, performance, and cash budgets. A forecast budget estimates figures within an expected specific time frame. Accountants may use figures from previous years to calculate estimates for the current year. The performance budget aims to provide estimates on upcoming revenues and expenses, usually on a service rate or per project basis. Lastly, the cash budget estimates how much the business will require throughout the year. Accountants create a cash budget by predicting future business transactions and cash receipts within an expected time frame.
Debit and Credit
Debits and credits confuse people often, especially in the field of accounting. In short, debits increase assets while decreasing liabilities and equity. Credits increase liabilities and equity while decreasing assets. Accountants record debits as any item that impacts or increases assets, such as equipment, bank balances, and accounts receivables. Businesses that make a payment on a loan towards an asset create a credit transaction. Accountants record both debits and credits for the most accurate bookkeeping. People at home have their own debits and credits to keep records of in the long run. For instance, a payment on a car loan translates to debit before becoming a credit. Accountants deal with debits and credits on a daily basis due to a frequent exchange of value between assets and liabilities in business transactions.
A career in accounting can be quite rewarding; however, the individual pursuing the career must be good with numbers. Accountants can perform a variety of tasks, including reviewing and analyzing financial information for clients in the form of taxpaying, auditing, and advisory. The majority of accountants earn large salaries, especially if they become Certified Public Accountants (CPAs). Accountants generally earn a four year degree before entering the field. After obtaining two years of experience, accountants can sit down for the CPA-exam to earn their license. According to the Bureau of Labor Statistics (BLS), the median annual salary for accountants was $61,690. The demand for accountants will only increase as more businesses and corporations need a means to keep track of their financial records. This also applies for accountants wishing to work overseas.
Accounting Learning Activities
Accounting can be a complicated and intimidating part of any business model. Students have a harder time understanding the accounting concepts. In fact, skilled activities are the only way for students to understand the accounting function of a business. Learning activities place the students into a real life scenario that may help them grasp the role of accounting in a positive light. Most students need to understand the complexity of accounting in a fun, entertaining environment.
The field of accounting involves a lot of complex and confusing principles. Students who spend a little more time reading about accounting will grasp the concepts better than those who simply forget about it. Many organizations, associations, and publications provide information that can help students learn more about the field. Supporting instruction and documents will keep students on the right track, especially if they choose accounting as their career.
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