Accounting Skills

Updated on April 30, 2024
Article byWallstreetmojo Team
Edited byPallabi Banerjee
Reviewed byDheeraj Vaidya, CFA, FRM

What Are Accounting Skills?

Accounting Skills are the skills required to present business transactions comprising financial and non-financial in the books of accounts as per prescribed Standards of Accounting (US GAAP, IFRS, Ind AS) and as a part of legal compliance and analysis of business outcomes in an optimum way.

What Are Accounting Skills

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Accounting skills are not something everyone possesses. It is required to obtain the professional qualifications to attain a proficient level of knowledge in accounting and secure business from wrong decision making. Also, knowledge of technology, accounting software, the security of accounting data, change/modify/display of accounting data, and access management is a must in the present era, along with domain experts in accounting.

Accounting Skills Explained

Accounting is a building block of all vital decisions of a business. It is the art of recording business transactions into books of accounts. Without appropriate books of accounts, it is impossible to ascertain various business parameters. Such parameters include- profitability, growth, variance, budgeting, planning, sales forecast, tax calculation, etc. The top management takes all critical decisions based on data presented on charts, graphs, pivots, and tables prepared from accounting data. If any loophole is found in accounting, there are high chances of wrong business decisions. Hence, it is of utmost required to understand accounting skills.

These skills are ones that a candidate can achieve through detailed study of accounting concepts and methods, understanding how and why a process is followed, how accounting skills assessment helps the organization to achieve its aim and in what ways they do so.

The skills may be hard core technical processes that has to be learned and mastered through rigorous practice and clear understanding. They require proper domain knowledge, ability to handle different accounting software and needs very clear basic concept.  The skills may also involve ability to communicate and analyse, tracking of the latest development in accounting field, identifying the plans and policies of company management regarding the implementation of such skills, and decide on future courses of action.

Accounting skills assessment are crucial for any accounting professional since they decide the performance and confidence level in performing their duties and responsibilities while maintaining the accounts and financial records of the business.

Accounting Skill Types

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Types

Key accounting skills could be further divided into two types – soft skills and hard skills.

#1 – Hard Skills in Accounting

Hard skills in accounting mean a set of skills related to the core knowledge of Accounting. Without that, it is impossible to account for anything in books of accounts. It includes Basic Accounting knowledge to Accounting for all special business transactions such as Accrual/Deferrals, DepreciationDepreciationDepreciation is a systematic allocation method used to account for the costs of any physical or tangible asset throughout its useful life. Its value indicates how much of an asset’s worth has been utilized. Depreciation enables companies to generate revenue from their assets while only charging a fraction of the cost of the asset in use each year. read more, Provisions, Year-end adjustments, etc. Type of Hard Accounting skills are a follow-

Domain Knowledge

Domain knowledge means knowledge of the core area of anything. In this prospect, an understanding of the basics of accountingBasics Of AccountingAccounting is the formal process through which a company attempts to present its financial information in a way that is both auditable and usable by the general public. read more must be taken. For Example, rules to the record journal entry, creating ledgers, bank reconciliationBank ReconciliationCustomers perform bank reconciliation to tally their records with their respective bank's statements because there may be differences between the customer's books of accounts and those of the bank.read more, Financial statementsFinancial StatementsFinancial statements are written reports prepared by a company's management to present the company's financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels.read more, cash flow statementCash Flow StatementA Statement of Cash Flow is an accounting document that tracks the incoming and outgoing cash and cash equivalents from a business.read more, etc

Professional Qualification

Over and above basic knowledge of accounting, it is crucial to know key accounting skills of certain scenarios such as Accounting for mergers and acquisitionsMergers And AcquisitionsMergers and acquisitions (M&A) are collaborations between two or more firms. In a merger, two or more companies functioning at the same level combine to create a new business entity. In an acquisition, a larger organization buys a smaller business entity for expansion.read more, consolidation of financial statements, accounting for employee benefits, accounting for financial instrumentsFinancial InstrumentsFinancial instruments are certain contracts or documents that act as financial assets such as debentures and bonds, receivables, cash deposits, bank balances, swaps, cap, futures, shares, bills of exchange, forwards, FRA or forward rate agreement, etc. to one organization and as a liability to another organization and are solely taken into use for trading purposes.read more, etc. Expertise in the above-stated areas comes via acquiring professional courses such as Chartered Accountant, MBA in Finance, etc.

Knowledge of Accounting Software

In the modern era, no manual transactions are recorded in the books of accounts. Think of Big Bazar or Dmart recording its Sales transactions manually in the Sales register with a pen. It’s impossible due to the high volume of business transactions. Hence, it is necessary to understand accounting software, which automatically captures sales transactions from vouchers and generates sales entries automatically.

Stay Up-to-Date

Up-to-date in terms of changing legal provisions by the government. For example, in India, previously, Accounting was done considering Accounting Standards. However, new Ind AS came into the picture for business falling into stipulated criteria. An accountant needs to know all the changes and their respective impacts on books of accounts. Else, the business might face litigations from the government for non-compliance with the statute.

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#2 – Soft Skills in Accounting

As per the dictionary meaning, Soft skills mean “interpersonal skills (personal characteristics) that enable the person to communicate/interact with another person effectively.” Soft skills in Accounting are an add-on to the hard skills of accounting. It allows an accountant to better presentation into books of accounts. Types of soft accounting skills are as follows-

Analytical Skills

Communication Skills

  • To appropriately communicate all matters to top management and team members is necessary. Communication skill accounting skills and qualities includes both written and oral communication. In the modern era, written communication emphasizes Email etiquette. It is essential to know whom to keep in “TO,” “CC,”/” BCC.” The escalation hierarchy should be clear to complete work on time. Any change in the date of submission of accounting data to the CFO/FM should be precisely communicated to the team.
  • In the case of Oral communication, Videoconferencing and telephonic conversation are of more importance. Preparation of MOM (Minutes of the meeting), greetings, line testing, etc., to be kept in mind. Any changes in the Standard of Accounting should be appropriately conveyed to team members and trained if required.

Industry knowledge

Management Traits

  • Management is not only restricted to managing Team members but also includes managing time, business resources, different business scenarios, etc. For example, any technical upgrade in accounting software is required to boost the morale of team members for accepting the new change.
  • Also, it is to be taken care that deploying new software gets done within a specified time by taking regular follow-ups with the vendor. The new deployment will be done with minimal usage of business monetary and non-monetary resources considering that deployment will capture all business scenarios.

Examples

Let us consider an example to understand the concept better.

We assume that Mina is an accounting professional who has a bachelor’s degree in accounting and taxation along with a degree in Certified Public Accountant (CPA). This has got her a job in a very reputed MNC at a lucrative salary. This has also given her the opportunity to work with very talented professionals in the same field who taught her many complex issues that one may not be able to learn theoretically.  

We see from the above case that both theoretical knowledge as well as practical experience is equally important for a candidate to become successful in the accounting and related field and along with it hard work, eagerness to learn and ability to identify opportunity is also important.

How To Improve?

Even though such skills are developed and improved through continuous and rigorous learning and practical experiences, they can be improved through the following steps.

  • It is important to enroll into courses that teach such skills in detail. Such courses may start with the basic ones like a bachelor’s degree or a master’s degree in finance, accounting or anything related to it and along with it some professional courses like Certified Public Accountant(CPA) or Certified Management Accountant (CMA), etc.
  • Practical experience is an important ingredient in getting the success with regard to any career related field. This comes with the opportunity to handle projects, doing internships or part-time jobs in any reated field or department of a company along with the study to understand the concepts, their uses and importance better. Practical application and accounting skills test clarifies doubts and increase confidence.
  • It is equally necessary to have familiarity with different commonly used accounting softwares in the industry. This will help in remaining updated with the latest trends to increase employability and enhance efficiency.
  • Networking is of huge importance in this field because connecting with industry experts, professionals, peers and mentors expand the circle and help in gaining knowledge and expertise to stay updated. It is important to attend workshops or webinars to expand knowledge levels.
  • If a professional is able to gain expertise in a particular type of niche area within the accounting field, this enhances the possibility to gain good career opportunity since the competition is low.
  • Every professional should seek feedback for their performance and be ready to accept criticism with open mind in an accounting skills test. This leads to an urge to do better and expand one’s horizon.

Thus, the above are some of the ways in which an accounting professional can make a place for themselves in the competitive world and successfully retain it inspite of all the challenges.

Importance

Let us go through the importance of accounting skills in practical life.

  • These are as important as bricks in a building. Without possessing those mentioned above soft and hard accounting skills, no non-specialist can record the business transactions in the books of accounts. If anything wrong is accounted for, it ultimately leads to an inaccurate and improper representation of scenarios of business. It directly impacts key business strategies. Hence it is advised to hand over the accounting work to one who possesses sufficient accounting skills.
  • It helps the management as well as other stakeholders understand the business condition properly and take investment decisions.
  • It helps manage finances because through the books of accounts the real financial picture of the business is revealed. Every business has to create a budget for managing its various projects and operational processes, that require finance. Accounts provide a guidance for the same.
  • If there arises such situations, where cost cutting is necessary or there are crucial reasons for profitability to go down, such situations can be identified and rectified immediately through strict action.
  • As already highlighted above it is necessary to take any important decisions regarding different aspects of the business.
  • The accounting skills a professional possesses are in line with the accounting policies and procedures followed in any organization. Thus, it helps in legal compliance with various tax and financial laws and also the reporting standards followed in different countries all over the world.
  • These skills help in preparing accounts books that are the first step towards preparation of financial statements of a business. They are widely used by investors, shareholders, analysts and management to evaluate the financial health o the company for performance evaluation and investment related decision making and future planning.
  • Possessing proper skill is also a very good career option of candidates because of the ever expanding financial market and entry of new business that require competent accountants for accounting, taxation, auditing or similar roles.
  • Finally it is important to possess these skills to identify possible loopholes in the books of accounts and handle them on time to reduce risk of misstatement.

Recommended Articles

This has been a guide to what are Accounting Skills. We explain how to improve it with examples, importance and types of the same. You can learn more about it from the following articles –

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