Accounting practices have been used ever since the first farmer kept track of the number of sheep or cows he owned and the first merchants tracked inventory and kept records of their profits and losses. From these humble beginnings, accounting has grown to become one of the leading business sectors in the world today. Accounting is a system by which financial information is identified, recorded, analyzed, summarized, and reported for the use of decision makers. Put simply, accounting is the language of business.
An accounting system tracks all the financial activities of an organization (whether it’s a Fortune 500 company, a small independent book publisher, a nonprofit theater, or a government agency), showing when and where money has been spent and commitments have been made. This helps decision making by allowing managers to evaluate organizational performance, by indicating the financial risks and benefits of choosing one strategy over another, and by spotlighting current weaknesses and opportunities. It allows managers to take a step back, look at the organization, and assess how it is doing and determine where it should be going.
Many accountants are employed by the Big Four, which are defined as the four largest public accounting/professional services firms. The Big Four is comprised of Deloitte, EY (formerly Ernst & Young), KPMG, and PwC (formerly PricewaterhouseCoopers). Accountants, however, don’t work just for the Big Four. They work for public accounting firms of all sizes. Many others work in corporate accounting (from Fortune 500 companies to “mom-and-pop” shops), in government accounting, and for nonprofit organizations. Some own their own accounting firms. Others teach accounting and auditing. Accountants are responsible for four core functions: