Question

Why is Accounting called the "Language of Business" and describe the importance of managers knowing the accounting function.

Answer 1

Accounting is the language of business as it helps in communicating information regarding the

financial position of the company to different stakeholders

Accounting is recording of different economic events that take place within a company which classifies and summarises in the form of financial statements

External parties and users of financial statements rely on the accounting information that is provided to them in statements

like income statement and balance sheet to make various decisions.

Eg:Credit worthiness of company can be known by creditors using accounting information,

Debt paying capacity for loan purpose etc

Accounting information will be used by both current investors as well as potential investors.

Financial statements are used by both managers and by external users as well.

So Accounting is the language of business