What is Accounting? Everything You Need to Know About This Growing Field

Simply defined, accounting is the process of recording a business’ financial transactions. This involves summarizing, analyzing and reporting transactions, in monetary terms to oversight agencies, tax collection entities and regulators. In accounting, financial statements are used as a concise summary of a company’s transactions over a given period of time, encapsulating its operations, financial position and cash flows.

How long have accountants been doing their thing? The history of modern accounting dates back to the 15^th century when Luca Pacioli, an Italian mathematician, revamped the common bookkeeping structure of the time with his 1494 textbook called Summa de Arithmetica, Geometria, Proportiono et Proportionalita, which demonstrated the benefits of a double-entry system of bookkeeping.

Prior to this, most transactions were done using a barter system. Bookkeepers documented transactions in a narrative style that described what they owed and who owed them. This single entry system, with every transaction recorded in the same column, was the standard for the time. As currencies became available and tradesmen and merchants began to build wealth, they needed a more sophisticated way to keep the books. Pacioli’s double-entry system, with its separate columns for debits and credits, was the solution and remains the basis for the way we keep the books today.

The appearance of corporations and the emergence of the railroads in the United States in the 1800s were the catalysts to transform the ancient practice of bookkeeping into accounting as we know it. With the railroads enabling goods and people to be transported with unprecedented swiftness to different destinations, distribution networks, shipping schedules and an emphasis on efficiency suddenly became the new reality.

Businesses and investors were empowered to make informed decisions with financial statements, cost estimates, production reports and other metrics in a new and faster-paced world where time and distances were shortened and standardized, introducing a new way of doing business. For the first time, income and cash flow statements allowed investors to have a clearer picture of the financial health of a business.

A short time later, the accounting profession was born with the establishment of the American Association of Public Accountants in 1887 and, in 1896, of the title Certified Public Accountant (CPA).

Within the scope of the modern profession are the many types of accounting, spanning business and personal finances. Including:

The importance of accounting is impossible to overstate. Whether managed by a single accountant at a small business or a staff of dozens at a large corporation, accounting is an elemental function of just about any business. Its purpose is to provide an accurate picture of a company’s finances based on its financial transactions so that management can make informed decisions and turn a profit.

Accounting is also important when it comes to funding. Private investors need an accurate indication of the company’s performance, which is provided to them in the form of financial statements. If the company wants to borrow money for operating expenses or growth, financial statements in compliance with accounting principles will allow banks to carefully review the company’s financial state prior to approving the loan.

Accounting records are also used to establish a company’s value, so a business owner looking to sell to a larger business can establish a realistic valuation to negotiate the sale. On a big-business scale, such valuations are used in mergers and acquisitions. 

It’s also necessary for making and collecting payments. Without standardized accounting practices, it would be difficult for a company’s managers to keep track of what they owe to vendors (accounts payable) and what customers owe them, and on what terms (accounts receivable).

The discipline also plays a part in compliance with regulations, from paying taxes to state and federal authorities to the periodic financial reports public companies are required to file with the U.S. Securities and Exchange Commission.

Accounting professionals perform a broad variety of services that are essential to the financial affairs of businesses and individuals alike. The regular duties of accountants and auditors typically include:

Attributing employment growth to the ongoing globalization of business, a growing economy and a complex tax and regulatory environment, the Bureau of Labor Statistics (BLS) projects employment of accountants and auditors to grow steadily at 4% from 2022 to 2032, with about 126,500 job openings projected each year, on average, over the decade.¹ This growth is projected on a national level and local growth will vary by location. This projection is not specific to DeVry University graduates and may include earners at all stages of their careers.

The BLS further notes that technological change is expected to affect the role of accountants over the next decade, with some routine tasks being automated through the use of artificial intelligence (AI) and platforms like cloud computing and blockchain. This automation, according to the BLS, is not expected to reduce overall employment demand, but should make the advisory and analytical aspect of accountants’ work more prominent.

Finally, in a growing economy, the need for accountants and auditors is expected to grow as they are integral to preparing and examining growing businesses’ financial records, and will be needed to help handle the increase in financial documentation these businesses will require as they go public. 

Accountants work in a variety of industries and are employed by companies of all sizes. Though public accounting is a popular career choice, there are also unique accounting roles in federal, state and local government, at Fortune 500 companies, small businesses and non-profit organizations. 

Financial accountants organize and keep track of financial statements and maintain accounts payable and receivable. Financial accountants work extensively with technology to compute and classify financial records, ensuring that they're properly prepared for audits or questions from the organizational leaders.

People in this field provide senior management with forecasts of the company's profits and losses (income statements) and operating performance for the upcoming quarter and year. They analyze risk and help their companies adjust according to the financial data they're given.

Tax laws are complicated on all levels, and accountants who work in compliance or tax management may find employment working with federal or state taxes in either organizational or consumer-facing roles.

Internal auditors are the impartial watchdogs responsible for upholding the missions and visions of their organizations while simultaneously ensuring that funds are flowing where they need to be. Internal auditors might focus on:

This position requires you to create timely and accurate monthly financial analysis and reporting, as well as financial presentations that company leaders can use when meeting with investors or board members.

No purchasing department can operate well if it's not on-budget. That's where accountants come into play. Purchasing departments require professionals who are skilled at planning and assessing budgets.

Managing claims is essential to maintaining balance, according to the accounting equation. A business is made up of assets, and the claims on those assets impact the status quo. Claims professionals are responsible for keeping their organizations’ financial health in check.

Because accountants have been trained in problem-solving, analytics and research, they may choose to work as consultants. Financial consultants determine their clients’ financial positions and help them reach financial goals – whether those clients are individuals or organizations – by assessing debts, income, assets and expenses.

A CPA, or Certified Public Accountant, is an accountant who has passed the Uniform CPA Exam and obtained CPA licensure in their state or jurisdiction. Many people associate CPAs with tax preparation, but they perform a wide variety of tasks across different types of accounting, including auditing and forensics.

As described in BLS occupational outlook data, accountants typically choose to obtain CPA certification and licensure to enhance their job prospects or gain clients, and any accountant who files a report with the SEC is required to be a licensed CPA.

To become a CPA, candidates must obtain at least 150 semester hours of college coursework and pass the 4-section CPA Exam, then apply for licensure in their state or jurisdiction.

CPAs have to renew their licenses periodically. To make sure they are kept up to date with the industry’s best practices and regulations, license renewal requirements vary depending on where you live, but most commonly stipulate maintaining a certain number of hours of continuing professional education (CPE) courses, as well as ethics courses.

Regardless of any specialty they choose, accountants must be adaptable and technology-savvy they move forward in their career. This industry isn’t just growing, it’s also going digital. Some tasks may become more automated – making the analytical and strategic roles of accountants more prominent, according to the BLS. This means that the role of the accountant, for example, may change from entering accounting data and preparing financial reports to learning to leverage this data to enable better business decision-making.

As technology continues to impact the business world, the accountant’s role is continuously evolving to meet the changing needs of the companies they serve. As an accounting professional, you would expect to work with accounting information systems and technology as your role may include installing, designing, operating and managing integrated automated accounting systems. Some technology-related tasks that accountants may undertake include:

If you’re thinking a career in accounting is right for you, we can help you take the next steps with undergraduate and graduate-level accounting programs  that may help you prepare to pursue a variety of career roles in this growing and evolving field.