Requirements for Accounting 

In most cases, accountants use generally accepted accounting

principles (GAAP) when preparing financial statements in the U.S. GAAP is a
set of standards and principles designed to improve the comparability and
consistency of financial reporting across industries. Its standards are based
on double-entry accounting, a method in which every accounting transaction
is entered as both a debit and credit in two separate general ledger accounts
that will roll up into the balance sheet and income statement. 7

In most other countries, a set of standards governed by the International

Accounting Standards Board named the International Financial Reporting
Standards (IFRS) is used.8

Example of Accounting
To illustrate double-entry accounting, imagine a business sends an invoice to
one of its clients. An accountant using the double-entry method records a
debit to accounts receivables, which flows through to the balance sheet, and
a credit to sales revenue, which flows through to the income statement.

When the client pays the invoice, the accountant credits accounts receivables
and debits cash. Double-entry accounting is also called balancing the books,
as all of the accounting entries are balanced against each other. If the entries
aren't balanced, the accountant knows there must be a mistake somewhere
in the general ledger.

History of Accounting
The history of accounting has been around almost as long as money itself.
Accounting history dates back to ancient civilizations in Mesopotamia, Egypt,
and Babylon. For example, during the Roman Empire, the government had
detailed records of its finances. 9  However, modern accounting as a
profession has only been around since the early 19th century.

Luca Pacioli is considered "The Father of Accounting and Bookkeeping" due

to his contributions to the development of accounting as a profession. An
Italian mathematician and friend of Leonardo da Vinci, Pacioli published a
book on the double-entry system of bookkeeping in 1494. 1 0

By 1880, the modern profession of accounting was fully formed and

recognized by the Institute of Chartered Accountants in England and
Wales.1 1  This institute created many of the systems by which accountants
practice today. The formation of the institute occurred in large part due to the
Industrial Revolution. Merchants not only needed to track their records but
sought to avoid bankruptcy as well.

What Are the Responsibilities of an Accountant?

Accountants help businesses maintain accurate and timely records of their
finances. Accountants are responsible for maintaining records of a company’s
daily transactions and compiling those transactions into financial statements
such as the balance sheet, income statement, and statement of cash flows.
Accountants also provide other services, such as performing periodic audits
or preparing ad-hoc management reports.

What Skills Are Required for Accounting?

Accountants hail from a wide variety of backgrounds. Generally speaking,
however, attention to detail is a key component in accountancy, since
accountants must be able to diagnose and correct subtle errors or
discrepancies in a company’s accounts. The ability to think logically is also
essential, to help with problem-solving. Mathematical skills are helpful but are
less important than in previous generations due to the wide availability of
computers and calculators.

Why Is Accounting Important for Investors?

The work performed by accountants is at the heart of modern financial
markets. Without accounting, investors would be unable to rely on timely or
accurate financial information, and companies’ executives would lack the
transparency needed to manage risks or plan projects. Regulators also rely
on accountants for critical functions such as providing auditors’ opinions on
companies’ annual 10-K filings. In short, although accounting is sometimes
overlooked, it is absolutely critical for the smooth functioning of modern
finance.

The Fundamentals of Corporate Finance and Accounting

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