Is it true that accounting is often characterized as the language of business?

In this article, we will learn in-depth about why accounting is called the language of business, and much more.

Accounting is Called the Language of Business. 

Why is accounting called the language of business? Before we discuss it, we first need to learn what the language is?

Language is a medium by which people express their feelings to one another. People express all their emotions in the proper way through words. Language is the sum of a few words and symbols.

The language may be of two types: one oral, the other written. There are many people in the world who speak, each expresses their mind in their own language.

For example, people in Bangladesh speak Bengali, people in the United States and the United Kingdom speak English, and people in India speak Hindi, as well as business people who have their own language, in which each business organization publishes its information to others.

“Accounting is the process by which the business organization communicates its data with others. In modern times, accounting is known as the business language.”

Accounting is called the language of business, let’s start by describing the reason why is accounting called the language of business?

Accounting is used as a means of publishing financial events that take place in an institution. We know that the sender and the receiver are required to use the language. 

In the field of accounting, the accountant acts as the sender, and the various parties associated with the organization, such as the owner-workers, creditors, government, investors, and debtors, all act as clients or receivers of financial information.

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Just as the language expresses the mind by arranging the words neatly and clearly, so does the accounting that records all transactions carried out in the book of accounts, accurately and beautifully, informing all parties concerned about the financial results and the financial condition. 

Just as different synonyms, symbols, lines, and signals are used in the language, different synonyms, lines, signals, and symbols can be used in the accounting sector. For example, debit-credit, assets, liabilities, etc. That’s why accounting is called the business language.

You can also read: What is accounting? Process of Accounting

When the language is simple and understandable to all, the language becomes universal. Accounting also conducts its duties in compliance with and internationally recognized laws. 

Accounting is often called the “Language of business.” It is a means of communicating information about a business. Its responsibility is applying a thorough knowledge of the theory of accounting, that is, generally accepted principles of accounting to the practical field of business in order that income and financial position may be stated fairly.

Accounting is the analysis and interpretation of book­keeping records. It includes not only maintenance of accounting records but also the preparation of financial and economical information which involves the measurement of transaction and other events pertaining to a business.

To operate a business profitably and to stay solvent, the profitability and solvency of a business should be measured at regular intervals. For that, it is essential to know whether a business is earning sufficient profits or incurring losses and it has sufficient money to pay off debts. Accounting provides all these pieces of information which enable the management to guide the business on a profitable and solvent course.

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After analyzing properly the information supplied by the accounting statements, the users of the same take decisions for future activities. Since accounting supplies the necessary information, it performs, in fact, a service function and, at the same time, it is used to represent economic position of an entity. Therefore, it becomes clear that keeping of accounts is not the primary objective of a person or an entity.

On the contrary, the primary objective is to take decision on the basis of financial facts presented by accounting statements. Thus, the understanding of accounts is not the basic objective; it only helps to realize a specific objective. As such, accounting is not an end in itself but a means to an end.

We express ourselves through our language. Similarly, the results of the activities are expressed through accounting with the help of financial statements. Accounting measures the performances of the business, that is, profitability and financial position. Thus, the language of accounting expresses the whole story of the undertaking through the various processes of accounting. The progress of the firm can easily be compared and seen with the help of various accounting data.

Yuji Ijiri, observes “As the language of business, accounting has many things in common with other languages. The various business activities of a firm are reported in accounting statements using accounting language, just as news events are reported in newspapers, in English or another Language.

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To express as event in accounting or in English we must follow certain rules. Without following certain rules diligently, not only does one run the risk of being misunderstood but also risks a penalty for misrepresentation, lying or perjury. Comparability of statements is essential to the effective functioning of a language whether it is in English or in accounting. At the same time, language has to be flexible to adapt to a changing environment.”