Assessment Description:

Accounting is often referred to as “the language of business.” Explain in your own words what that expression means.

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SOLUTION to ACC 240: Fundamentals of Accounting- Topic 1 DQ 2.

Hello class,

            In my opinion, the expression "accounting is the language of business" captures the idea that accounting serves as the primary means of communication for businesses and their financial operations. Put simply, accounting is how companies document, quantify, and report on their economic activities and financial position. This means that accounting provides the framework and standardized terminology that allows entities involved in business to meaningfully discuss finances. Terms such as revenues, expenses, assets, liabilities, equity, income, and cash flows are, by virtue of their meanings in accounting, clear and easily understandable irrespective of the fields of operations or activities. In my view, it is due to this common language and set of rules that businesses, investors, creditors, regulators for example are able to assess and make sense of the state of affairs or performance of business organizations.

            To support my argument, scholars such as Bigel (2022) state that through mechanisms like income statements, balance sheets, statements of cash flows, and other structured reports, accounting converts raw financial data into meaningful information that tells a story. It transforms numbers into a narrative format that non-accountants can follow and gives useful context to things like profitability, liquidity, leverage, and growth. This is by translating complex financial workings into straightforward analyses easily digestible by both specialists and laypeople.

            In addition, there are other views from scholars like Boiral et al. (2020) who argue that, accounting “language” might refer to the set auditing practices that enhance transparency, credibility, and accountability. This is the planned and structured approach of capturing and categorizing business transactions that can be independently and accurately assessed by a third party. This makes it easier for organizations and their various users to build trust hence aiding in decision making, regulation and efficiency in the market. Nonetheless, by providing a common financial terminology and reporting structure, it can be argued that accounting serves as the universal language that allows all players in the business world to communicate, understand, and utilize the same financial information.

References

Bigel, K. S. (2022). Introduction to financial analysis. https://pressbooks.pub/introductiontofinancialanalysis/

Boiral, O., Heras-Saizarbitoria, I., & Brotherton, M. C. (2020). Professionalizing the assurance of sustainability reports: the auditors’ perspective. Accounting, Auditing & Accountability Journal, 33(2), 309-334. https://doi.org/10.1108/AAAJ-03-2019-3918