Accounting is a multifaceted discipline of identifying, measuring and communicating of an organization’s economic health. The discipline of accounting is best understood when one has strong conceptual understanding of other interconnected disciplines. The other disciplines which accounting is increasingly seen to interact with are: Economics, Mathematics, Statistics, Law and Management. Let’s discuss in brief the relationship of accounting with its related disciplines.
Relationship between accounting and economics – When considering the obviousness of their interconnection what is understood is that both accounting and economics are concerned with the effective and efficient utilization of resources, rather, when they are scarce. Both accounting and economics are meant to maximize the wealth and so the economists and accountants are consistent with the aspect that capital should be intact when calculating the income. The income can be distributed without affecting capital. More importantly, whenever there is a need for any economical decision making, there is a need for accounting. Accounting is intended to provide information to the owner of a business firm, on the other hand, economics is concerned with how the overall economy works and how single markets function. It can be understood that accounting provides the information upon which the economics models are prepared.
Besides, it is important to note that with regard to the problems in relation to profit maximization, there is a great need for understanding the rate of interest and payment of dividends. And in order to deal with such problems both accounting and economic theory are of great significance. It is thus to be said that both accounting and economics are connected with each other.
Relationship between accounting and Mathematics – Accounting deals with concrete numbers expressing real sums and involving operations to create a good set of numbers- going beyond the numbers- determining financial position of a business house and ensuring whether or not a business is making money. In doing so, it involves basic computational mathematics. Moreover, the basic system of accounting needs to be changed into an accounting equation which shows Left hand side- LHS equals Right Hand Side- RHS. In this way, the knowledge of arithmetic and algebra are prerequisite for accounting computations and measurements.
Relationship between accounting and statistics – Accounting is not just about the preparation of accounting information, but it necessitates interpreting and presenting the financial information which leads to create tables and graphs. The knowledge of creating tables and graphs is attained through the discipline of statistics. There is another important factor to consider how accounting is connected with statistics is that it uses price indices which has to do with creating tables, while the interpretation involves making absolute and relative comparison by means of ratio analysis. Thus, for doing all these, the knowledge of statistics is much needed and so accounting is linked with statistics as well.
Relationship between accounting and Law – Accounting is connected with law, as it operates within a legal environment and thus all the transactions are governed on the basis of different acts. Business organizations are governed by their respective statues that provide many aspects pertaining to the preparation of accounts. However, it is likely that accounting influences law and is also influenced by law. In this way, accounting is also related to law because of many legal aspects and procedures.
Relationship between accounting and management – Management is administration of business. It involves organizing and controlling of the affairs of a business or a sector of a business. Management, in simple terms, getting things done and the methodology which is put into practice in order to get the things done or the functions with their sequence undertaken by a manager is what is said to be management process which involves: Planning, organizing, directing and controlling (PODC). Thus, management involves many functions and application of many disciplines, such as, economics, mathematics, statistics and computer etc. Accounting professionals are better off with what they study through their course to understand and use the data for providing the required accounting information to management for facilitating in decision making process.
Professionals in all fields need to have good writing and communication skills of English language. Effective writing ability must be regarded as an asset to the person, as it leads to create value for him.
Though economic actions intend to make us better off, it may not happen every time. This dichotomy between objective and results, or between theory and observations, can be best understood by the distinction between microeconomics and macroeconomics.
All economic activities including the most complex ones are finally aimed at consumption. However, to understand the kind of consumption that may be preferred by an individual, the concept of utility and indifference curve are extremely helpful.