In your personal life, accounting gives you financial awareness. If you have no concept of monitoring your cash outflows, it is easy to end up living beyond your means. When you sit down and take account of all your sources of income and compare those figures to your monthly debt obligations, you could be surprised at just how much money you waste on unnecessary expenses. Seeing the figures in front of you can be a jump-start toward getting your finances in order.
Once you are aware of your finances, you can take the steps to organize them. An effective accounting system will allow you to not only budget properly but also to maximize deductions when you file your returns. Initially, you may not think to save your receipts for business supplies, track your gas mileage or save your medical invoices. Once you realize that keeping this material organized can lead to money back at tax time, the incentive to implement an easy-to-follow accounting system grows.
After gaining an awareness of the importance of accounting to your personal life, you will have a greater appreciation for its importance in your professional dealing. The importance of ethics in accounting is even greater when dealing with a business. When reporting your business income to the federal government, you must ensure the numbers are accurate. Not only do you ensure you pay your fair share, you also accurately represent yourself to potential investors.
Accuracy is crucial in accounting, but mistakes can and do happen. It is how you deal with those mistakes that fall within the guidelines of professional ethics. If you catch a discrepancy in a reported financial statement, contact the IRS immediately and file an amended return. If, on the other hand, you actively and knowingly attempt to deceive the government, your employees or your investors, you are committing fraud. This type of unethical behavior can lead to a tarnished reputation, fines and imprisonment.