Since accountants are responsible for recording and analyzing various business operations, they must master mathematical skills that range from basic computation to depreciation formulas. Although knowledge of algebra is helpful, it is not necessary. Mathematical skills needed by accountants to pass the CPA examination are learned in the various accounting classes.
The Work of Certified Public Accountants
The work of the CPA is essential in every business and government entity. They audit, analyze, and compute taxes and give advice to businesses, governments, and individuals that conduct business in the United States. They use ratios, percentages, and comparisons to determine the entity’s financial position and advise management about the best course of action to improve their financial position. Before engaging in work as a CPA, candidates must pass a state examination.
Sections of the CPA Exam
The four sections of the CPA examination are auditing, business environment and concepts, regulation, and financial accounting. You may choose the order in which you take the sections, but you must successfully pass all four sections within 18 months.
Noting the various sections of the CPA examination, you may conclude that the only section requiring mathematics is the financial and recording section. The other sections test the candidate’s knowledge of law, ethics, and business strategy.
Financial Accounting and Reporting
This section contains material learned in college accounting classes from basic accounting through cost/management accounting. In addition, governmental, nongovernmental, and not-for-profit accounting material is covered. Financial statements, typical business transactions, and accounting concepts are covered.
A class in business mathematics is sufficient to prepare the CPA candidate to pass the examination. For example, the successful candidate knows that current assets divided by current liabilities yields the current ratio. The ability to interpret the significance of the ratio distinguishes the quality of the accountants.
Comparing Financial Statements
The accountant compares income statements and balance sheets to determine what the business entity has done during the past years. The difference between each asset, liability, and equity account balance shows the increase or decrease of the account between the years. The accountant may divide the total into the individual accounts to determine the percentage for each account. A basic business mathematics class prepares the accountant for making these computations.
Regardless of the system used, the accountant uses basic mathematical skills for cost accounting. Addition and subtraction are needed to determine inventory values, and division is used to determine unit cost. The desired profit is determined and is computed using basic mathematical skills.
Taxes and Payroll
Basic mathematical skills are used to compute depreciation, taxes, and payrolls. The IRS has determined the methods used to compute depreciation and payroll taxes. In addition, the IRS also provides charts to determine the amount of depreciation for each year of the asset’s life.
The CPA compares the various ratios and financial statements with the industry standards. By making these comparisons, the accountant will know how well the entity is doing. He or she will be able to determine what the entity needs to do to improve its position in the industry.
The work of the CPA requires an analytical mind to analyze financial statements and other reports. The mathematical skills necessary to complete these reports require basic mathematics.
Robert Penny writes on education, accountancy, mathematics, higher learning and other kindred subjects. Those curious about accounting jobs can learn a great deal more about accounting jobs with moneyjobs.com.