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.

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

This type of accounting records, analyzes and summarizes a business’s financial transactions. The responsibility of financial accountants is mainly to create statements that provide information about the business’s financial condition for investors, customers and creditors. Financial accountants use a standardized set of rules called the Generally Accepted Accounting Principles (GAAP), making their reporting consistent across accounting periods and enabling transparency.

Tax accountants are the professionals who decipher the complex tax code. They help individuals and organizations comply with tax regulations, understand their liabilities and make payments. This work involves reviewing financial statements, calculating taxes and preparing tax returns.

Also called managerial accounting, this practice is similar to financial accounting in its scope and methods, but it focuses on creating reports that are submitted to business managers and others who are part of internal management and corporate finance teams. The management accountant’s purpose is to help their company make the best financial decisions. Many of these accounting and finance professionals pursue the Certified Management Accountant (CMA^®) certification.

This type of investigative accounting focuses on auditing both businesses and individuals to uncover signs of fraud or embezzlement. Forensic accountants often work for insurance companies or law enforcement agencies, analyzing financial records, tracing funds, recovering assets and sometimes testifying in court.

Auditors analyze a company’s financial activity to ensure compliance with regulations and best practices and examine the company’s records to create reports. There are two types of auditors: internal and external. Internal auditors work within an organization to provide business audits that help the organization improve operations and ensure regulatory compliance. External auditors are accountants who work for a third party, such as a regulatory agency, reviewing company accounts to be sure they are accurate and compliant with regulations. 

Cost accounting is a subset of management accounting used to help a company measure financial performance and make informed business decisions. This type of accounting takes a holistic view of a company’s production expenses, fixed and variable costs or overheard needs to identify how much profit they’ve made.

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, providing 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. 

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.

If you’re wondering what accountants do, this really depends on the type of accounting they work in, which we covered in the section above. If accountants and auditors choose to work for organizations that provide assurance services or risk management, want to specialize or are drawn to a specific field such as finance, insurance or healthcare, they may need to develop a specific skillset or gain additional training.

However, some of the more general duties that accountants and auditors are typically responsible for 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.

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, and 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 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.

Accounting standards were established by the Financial Accounting Standards Board (FASB) to ensure financial reporting is done fairly and accurately. Prior to the establishment of these rules, companies could vary their accounting methods, potentially exposing investors to financial risk. The 10 principles of the GAAP, such as regularity, consistency, sincerity, prudence, continuity and others defend against this and establish a framework for consistent reporting.

The GAAP also has 4 constraints built into it that accountants and auditors must adhere to when preparing financial statements, ensuring accuracy, consistency and keeping them aligned with financial reporting regulations. 

Investors and lenders depend on information that presents a true picture of a business’s financial wellbeing. The accounting cycle is a repeatable process that records all financial transactions in a specific accounting period and requires closing entries be posted at the end of it. This process ensures that financial performance is tracked, allowing one period to be compared to another over time.

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 the scope of their services extends beyond tax season. They perform a wide variety of accounting services and tasks spanning 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, though that number may vary by state, and pass the 4-section CPA Exam,² then apply for licensure.

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 may choose, accountants must be adaptable and technology-savvy as they move forward in their careers. 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 first steps with undergraduate and graduate-level accounting degree and certificate programs that can help you prepare to pursue a variety of career roles in this growing field. 

Online learning with DeVry can help you balance your commitment to education with your busy life, and scholarships and grants can make your education with us more affordable.³

DeVry’s Accounting programs have received specialized accreditation from the Accreditation Council for Business Schools and Programs (ACBSP, www.acbsp.org).⁴

At DeVry and our Keller Graduate School of Management, we can help you learn what you need to know to thrive in accounting. Several of our programs integrate elements of Becker Professional Education’s CPA Exam Review, with select programs helping you prepare to pursue the CPA² or CMA exams.