Origins and Purposes of Accounting

Reply #2

Hello class,

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I chose to answer question #2. I have pasted it below for reference.

“Look at the origins and purposes of accounting and discuss how our society’s development has been affected by its use. Could our society function as it currently does without accounting? Please explain.”

My answer to this question would have to be, no, our society could not function as it currently does without accounting. Our society, the way it functions currently requires accounting. Every single business entity in the world needs it to ensure they are in a good profit margin as well as ensuring they are operating efficiently. The only way to ensure that is to keep a good record of all finances and using accounting be it by hiring an accountant or having some accounting background. Every business has profits and losses. A business cannot function without a profit, or it will go bankrupt.

According to the basic accounting equation of assets = liabilities + stockholders’ equity, without accounting, businesses would have no way of tracking how much money they were really profiting or spending. This would cause stockholders to question whether their money was being taken care of as well as whether they should continue to keep stock in this business. Without accounting and all aspects of the process, businesses would just see money coming in and going out with no system of knowing whether they were profiting or loosing until it was happening in front of their face with no warning. There would be no balance sheets, no income statements, nothing at all to track anything dealing with money to the full extent. Accounting works by showing where money is going and where its coming from as well as where there needs to be some help and where you can pull from. It helps to create informed decisions to keep businesses thriving, without it, businesses would be making decisions that are on a gut feeling or uninformed much like trying to throw a dart at a dart board with a blindfold on. You have no way of knowing where the dart board is in retrospect of yourself or if you’re aiming in the right direction.

 

[1] Original Forum Question:

(2nd question) Look at the origins and purposes of accounting and discuss how our society’s development has been affected by its use. Could our society function as it currently does without accounting? Please explain.

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