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Accounting Is Said to Be the Language of Business as the Success or Failure of Many Organisations Is Determined in Financial Terms.” Critically Discuss.

By | March 2013
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3a. “Accounting is said to be the language of business as the success or failure of many organisations is determined in financial terms.” Critically discuss.

Accounting is the process of recording, classifying and summarising in a significant manner and in terms of money, transactions and events. It is the communicating of financial information about a business entity to users such as shareholders and managers. The communication is generally in the form of financial statements that show in monetary terms the economic resources under the control of management. The information has to be relevant and reliable. The failure or success of an organisation lies within the parameters of accounting as this discussion shall bring out. There are three main financial statements that play an important role in an organisation namely the statement of financial position commonly known as the balance sheet, cash flow statement and the trading profit and loss account. It is in accounting where ratios which are indicators of how financially healthy an organisation is, are calculated. These statements show the organisation’s performance in terms of profitability as well as the general management of cash flows. The statement of financial position or balance sheet is a statement that shows an organisation’s assets and liabilities. Assets are the resources that are owned by a business and liabilities refer to the total money an organisation owes for assets supplied to a business. Below is illustration of a balance sheet. BALANCE SHEET FOR BARONCILAH TRADINGS AS AT 31 DECEMBER 2009 |

Assets2009Liabilities and Shareholders’ Equity 2009 |
Current assetsCurrent Liabilities
CashxxxxxxxxCreditorsxxxxxxxx
BankxxxxxxxxLoansxxxxxxxx
StockxxxxxxxxBank ODxxxxxxxx
Debtorsxxxxxxxx

Fixed assetsLong term Liabilities
VehiclesxxxxxxxxLoansxxxxxxxx
EquipmentxxxxxxxxDebenturesxxxxxxxx...
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