Accounting drives clarity and confidence across every industry, transforming numbers into decisions, strategy, and accountability. From its historical roots to today’s evolving standards, accounting influences how organizations operate and grow.
Below, we cover the key types of accounting, the accounting cycle, and dynamic career paths — along with practical ways to get started in the industry, including opportunities through Johnson & Wales University (JWU) Online’s undergraduate and graduate programs.
What Is Accounting?
Accounting is the process of recording, organizing, analyzing, and reporting financial information to support decision-making and regulatory compliance. It helps businesses and organizations as well as individuals track financial performance, meet legal requirements, and plan for the future by turning financial data into reliable reports and clear, actionable insights.
Why Is Accounting Important?
Accounting is vital for several reasons, including:
- Providing financial visibility into performance and cash flow
- Supporting informed decision-making for growth and efficiency
- Maintaining legal compliance with regulations and taxes
- Strengthening investor and lender confidence with financial reporting
- Bolstering fraud prevention through controls and transparency
A Brief History of Accounting
Historical evidence of accounting dates back more than 10,000 years in Mesopotamia, Babylon, and Egypt, where people used token, tablet, or papyrus-based systems for tracking livestock, agriculture, and trade transactions.
Through the millennia, accounting evolved to become increasingly sophisticated. In 1494, Luca Pacioli — a friend of Leonardo da Vinci — published a book explaining the double-entry bookkeeping system. As economies grew in complexity during the Industrial Revolution in the late 19th century, accounting had become a fully formed, modern profession designed to support trade, regulation, and transparency.
Today, the field continues to change alongside the ongoing advancement of digital tools and global standards that influence contemporary practices.
What Are Accounting Standards?
Accounting standards are formal guidelines that govern how financial information is recorded, presented, and disclosed. They exist to ensure consistency, accuracy, and transparency across organizations, making financial statements comparable and trustworthy for investors and regulators, plus other stakeholders who utilize financial data to make informed decisions.
GAAP: Generally Accepted Accounting Principles
Established and maintained by the Financial Accounting Standards Board (FASB), GAAP is a set of accounting rules used primarily in the United States. The guidelines standardize financial reporting practices, covering everything from revenue recognition to balance sheet presentation, in order to help verify consistency, reliability, and comparability across companies.
IFRS: International Financial Reporting Standards
Developed by the International Accounting Standards Board (IASB), IFRS is a globally recognized accounting framework used in many countries outside of the U.S. (and by global businesses headquartered in the United States). It emphasizes principles-based guidance, enabling flexibility while maintaining transparency and comparability across international financial statements and multinational organizations.
Why Accounting Standards Matter
Accounting standards are sets of rules that establish a common financial language on which organizations and stakeholders can rely. They enhance transparency and reduce ambiguity to ultimately bolster trust in financial reporting. These standards ensure consistency and comparability to support investment decisions, regulatory oversight, and the smooth functioning of global financial markets.
How Does Accounting Work? The Accounting Cycle Explained
The accounting cycle is a step-by-step process that businesses use to track, verify, and report financial activity. Each stage builds on the previous one, reinforcing accuracy and completeness while turning everyday transactions into reliable financial statements that stakeholders can trust.
Step 1: Identify and Analyze Transactions
The cycle begins with identifying financial transactions (e.g., sales, purchases, or payments) and determining their impact on accounts. Each transaction is analyzed to classify it correctly for accurate recording. This sets the foundation for consistent, meaningful financial reporting throughout the cycle.
Step 2: Record Transactions in the Journal
Once analyzed, transactions are recorded chronologically in the journal, using debits and credits. Often called journalizing, this step creates a detailed, time-stamped record of all financial activity that helps ensure transparency, traceability, and accuracy before information is transferred to more structured accounts.
Step 3: Post to the General Ledger
Journal entries are then posted to the general ledger, where transactions are organized by account (such as cash, revenue, or expenses). This step groups related activities, making it easier to track balances and monitor changes while preparing for the next stages of the accounting cycle.
Step 4: Prepare a Trial Balance
A trial balance is created by listing all account balances and confirming that total debits equal total credits. This step helps identify errors or discrepancies in the ledger, providing an early check on accuracy before adjustments are made and formal financial statements are prepared.
Step 5: Make Adjusting Entries
Adjusting entries update account balances to reflect accrued revenues, incurred expenses, and other timing differences. These updates verify that financial statements follow accrual accounting principles — matching income and expenses to the correct reporting period for a more accurate picture of financial performance.
Step 6: Prepare Financial Statements
Using the adjusted balances, accountants prepare key financial statements, including:
- Income statement (profit and loss statement)
- Balance sheet
- Cash flow statement
These reports summarize financial performance and position, presenting stakeholders with the clear, structured insights needed for decision-making, analysis, and long-term planning.
Step 7: Close the Books
In the final step, temporary accounts like revenues and expenses are closed to retained earnings, resetting their balances for the next period. This process finalizes the accounting cycle and ensures records are complete and ready for a fresh start in the upcoming reporting period.
What Are the Different Types of Accounting?
Accounting spans multiple specialties, each designed to meet specific reporting, analysis, and compliance needs across industries and organizations.
Financial Accounting
Financial accounting focuses on preparing standardized financial statements for external users. Investors, lenders, and regulators depend on these reports to assess performance. Financial accounting helps ensure transparency and consistency through frameworks like GAAP or IFRS.
Managerial Accounting
Managerial accounting provides internal financial insights to support business decisions. Managers use detailed reports, budgets, and forecasts to plan operations, control costs, and evaluate performance. Unlike financial accounting, managerial accounting is flexible and tailored to organizational needs rather than governed by external reporting standards.
Tax Accounting
Tax accounting entails preparing tax returns and planning strategies to comply with tax laws while minimizing liability. Professionals in this area work with individuals, businesses, and government agencies, applying rules from tax authorities (such as the Internal Revenue Service, or IRS) to ensure accurate and timely filings.
Auditing
Auditing involves examining financial records to verify accuracy and compliance with accounting standards and regulations. Internal auditors work within organizations, while external auditors provide independent assessments. Their work cultivates trust among stakeholders by confirming that financial statements provide a fair representation of a company’s financial position.
Forensic Accounting
Forensic accounting combines accounting, investigation, and legal expertise to detect fraud and financial misconduct. Professionals analyze financial data for irregularities and may support legal cases. This type of accounting is prevalent within law enforcement agencies, courts, and corporations dealing with disputes or suspected fraud cases.
Government and Nonprofit Accounting
Government and nonprofit accounting focus on tracking funds, ensuring accountability, and meeting reporting requirements unique to public and mission-driven organizations. These entities prioritize transparency over profit — following specialized standards to show how resources are allocated and whether spending aligns with budgets, regulations, and public expectations.
Cost Accounting
Cost accounting analyzes the costs of producing goods or services to improve efficiency and profitability. Common in manufacturing and production environments, it helps businesses set prices, control expenses, and optimize operations by breaking down costs into categories like materials, labor, and overhead.
Careers in Accounting
Organizations of all sizes rely on accounting professionals to manage finances, ensure compliance, and guide strategy, making it a highly versatile and stable career path. This field offers a wide range of accounting careers; opportunities span industries and sectors from public firms and corporations to government agencies, nonprofits, and startups.
Common Accounting Career Paths:
- Public Accountant/CPAs work with multiple clients to prepare financial statements, conduct audits, and provide consulting services.
- Corporate or Staff Accountants manage day-to-day financial activities within a company — including recording transactions, reconciling accounts, and assisting with financial reporting. This role is essential for maintaining accurate internal records and supporting month-end and year-end close processes.
- Financial Analysts evaluate financial data to help organizations make investment and business decisions. Analysts build forecasts and assess performance trends, then provide insights that guide budgeting, strategic planning, and resource allocation across departments.
- Budget Analysts help organizations plan and manage their finances by developing budgets and monitoring spending. Common in government and large institutions, this role ensures resources are allocated efficiently and aligned with organizational goals and financial constraints.
- Internal Auditors review internal processes and controls in terms of compliance, efficiency, and risk management. Internal auditors identify weaknesses and recommend improvements that help organizations prevent errors, fraud, and regulatory issues before they escalate.
- Tax Specialists or Tax Managers focus on tax planning, compliance, and reporting for individuals and organizations. These professionals interpret tax laws, prepare filings, and develop strategies to minimize tax liability while ensuring adherence to regulations.
- Controllers oversee an organization’s accounting operations, including financial reporting, internal controls, and compliance. These financial managers oversee accounting teams and verify the accuracy and integrity of financial data used by leadership for decision-making.
- Chief Financial Officers (CFOs) are senior executives responsible for the overall financial strategy of an organization. The CFO oversees budgeting, forecasting, investments, and risk management. They play a central role in guiding long-term business direction and financial health.
- Forensic Accountants investigate financial discrepancies and potential fraud by analyzing complex financial data. Often working with legal teams or law enforcement, these accountants provide evidence and expert testimony in cases involving financial misconduct or disputes.
- Government Accountants work within public sector agencies to manage public funds, prepare reports, and maintain compliance with regulations. This position emphasizes transparency and accountability to make sure taxpayer resources are used appropriately and effectively.
Accounting Job Market Outlook
Accounting jobs remain in steady demand. The U.S. Bureau of Labor Statistics (BLS) projects employment for accountants and auditors to grow 5% between 2024 and 2034, with nearly 73,000 new job openings each year. Ongoing talent shortages, regulatory complexity, and data reliance are driving demand. Plus, individuals with the right certifications and credentials (such as a Certified Public Accountant) may more readily access senior and specialized opportunities.
Key Accounting Certifications and Licenses
While a degree in accounting builds a solid foundation, accounting certifications* can expand career opportunities and credibility in the field.
*It’s important to note that JWU Online does not endorse specific professional credentials, and individuals should carefully research requirements and career goals before pursuing credentials.
Certified Public Accountant (CPA)
The CPA is a widely recognized license for accountants who meet education, examination, and experience requirements to provide auditing, tax, and consulting services.
Certified Management Accountant (CMA)
The CMA is a certification focused on financial management, strategic planning, and performance analysis for professionals working in corporate accounting and finance roles.
Certified Internal Auditor (CIA)
The CIA is an international certification for professionals who specialize in internal auditing, risk management, and governance within organizations.
Enrolled Agent (EA)
The EA is a tax-focused credential granted by the IRS that allows professionals to represent taxpayers before the IRS regarding tax matters.
How to Pursue a Career in Accounting
Establishing a career in accounting follows a clear, structured path that involves education, experience, and professional development. For many aspiring accountants, programs like those offered through JWU Online can present a flexible way to begin this journey while balancing work and life responsibilities. The following steps outline, simply, how to become an accountant:
Step 1: Earn a Bachelor’s Degree in Accounting
Start by earning an in-person or online bachelor’s degree in accounting to hone core skills that prepare you for entry-level roles in the field, including those related to:
- Financial reporting
- Auditing
- Taxation
- Business principles
Step 2: Consider a Master’s Degree for Advanced Opportunities
An in-person or online Master of Business Administration (MBA) in Accounting deepens expertise in specialized areas (like taxation, analytics, or auditing). Additionally, it can help candidates qualify for leadership roles or meet requirements for certain certifications.
Step 3: Gain Professional Experience
Internships or entry-level accounting roles provide hands-on experience with applying classroom knowledge to real financial systems. This exposure helps professionals develop technical skills and industry familiarity.
Step 4: Pursue Licensure and Certification
After gaining education and experience, many professionals pursue certifications to demonstrate skills and credibility, expand career options, and meet requirements for advanced accounting positions.
Ready to Start Your Accounting Career?
Accounting offers stability, versatility, and a clear path for growth across nearly any industry. Whether you’re just starting out or advancing your skills, it’s a career built for long-term opportunity. If a future in accounting interests you, explore JWU Online’s undergraduate and graduate accounting degree programs to take the next step.
For more information about completing your degree online, complete the Request Info form, call 855-JWU-1881, or email [email protected].