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  • Writer's pictureAccountant High Wycombe

Why Accountancy is Considered a "Business of Language"

Accounting Practices

Financial documents and accounting reports tell the story of a company's financial situation. It is therefore not surprising that accounting is often referred to as "business language". When leaders and policy makers talk about the health of their business, they usually refer to financial statements. Income, expenses, debts and liabilities are all part of the financial records and must be understood by anyone wishing to communicate clearly in the business world.

Making a sentence

The expression "accounting is the language of business" is attributed to Warren Buffet, Chairman of the Board and CEO of Berkshire Hathaway, while advising a 17-year-old trainee in a telephone interview with CNBC. Buffet advised the young man to study the accounting language because it was the best way to learn to read the financial statements. As with any foreign language, Buffet suggested that it takes time to acquire all the basics and integrate them into their understanding and use, but is ultimately a critical factor for success in the business world. This is what most of the accountants in High Wycombe (UK) say, according to one survey.

Accounting 101 Terms

Like any language, accounting has its own set of terminology. People in key financial positions within a company need to learn the accounting language and, in particular, the meaning of unique terms to be able to use them correctly and effectively on a daily basis. For example, accrual accounting, diversification, a balance sheet, a balance of control and a ledger are common accounting terms, but not everyone knows what these terms mean. Anyone who makes decisions about the financial management of a company should not only know what a balance sheet looks like, but also understand its individual elements and how to read it.

Accounting functions Create language

The functions performed by the accounting departments serve as the basis for all financial communications in a company. Accountants and accountants follow daily, weekly and monthly procedures for recording and tracking important financial data. The entry of these current commercial transactions into the books of a company and subsequent monitoring in the form of reports convey important financial information that helps the managers in their decision-making. For example, they may choose to make additional expenditures to stimulate growth or reduce their expenses due to a lack of income.

Speak the language of finance

The language of finance is closely associated with accounting. Finance takes the data and information presented in the accounting documents and interprets them to make business decisions. While accounting takes historical information about a company's operations and puts them in an organized format, finance, as a discipline, takes the collected data, looks to the future, and makes suggestions and decisions based on what appears to be a sensible and cost-effective course of action. Finance people must not only know how to interpret the accounting language, but also ask the right questions. For example, what do specific numbers really mean? Overhead costs are a significant expense for most businesses, but is this expense allocated or allocated to each product manufactured by the company, or is it presented as a single significant cost? Understanding the meaning of numbers is an important component of business language fluency.

A global language

With love and music, accounting must also be considered a universal language. The numbers work the same way around the world and the understanding of a company's bottom line in a balance sheet does not need to be interpreted cross-border. In mergers or global business transactions, the parties involved can easily understand the financial aspects of any transaction by consulting financial reports. This is true for any business transaction, even in local industries or with people looking to invest in a new business opportunity. For example, an investor may be unfamiliar with the specifics of a specific industry, but by reviewing a company's financial statements, it should be able to determine whether or not its business represents investment potential.

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