Is accounting the language of business?

Since we begin our university studies, we learn that accounting is the language of business. There are even those passionate about this science who claim that: “If someone is going to be in business and does not understand accounting, they should not be in business” . Statements of this kind may suggest that accounting education should almost be mandatory for anyone aspiring to enter the business world.

In the business world, we strive to communicate in the same way, which requires accounting information to be understood in any part of the country and around the world. Such idea originated the International Financial Reporting Standards (IFRS), so that financial statements could have a universal language; i.e., so that a company in Peru could speak the same language as a company operating in other countries around the globe.

This language has been standardized and improved globally by the IFRS, allowing us to understand, through a quantitative analysis of “past events”, the results of a company at a given time, which in accounting language is called a “period”. Such historical information is a crucial input, as it allows us to conduct a forward-looking analysis for financial planning.

Within the IFRS universe, the recently issued “IFRS 18” changes the way we view business results, making financial statements even more comparable. For this and many other reasons, understanding and mastering the accounting language is essential for business success. Accounting conveys the financial information of businesses and, for such reason, it plays a significant role in our business work.

The Royal Spanish Academy (“Real Academia Española” or “RAE”) defines language as an innate ability of human beings to use language and speech in an oral or written way. But what does it mean for a language to be universal? Can a language be universal? Music is conceived as a universal language, science provides us with universal scientific knowledge, and accounting is a science; therefore, its universal nature should extend to accounting as well.

On the other hand, a language is used within a community or communities in common. Then, while financial information is available to the general public, not everyone can interpret or analyze it. It is essential to know about accounting if we are part of the business community.

Therefore, wouldn’t it be better to think that, rather than just a language, accounting is the language of business? From a modest point of view, we can venture to say that accounting is indeed a language, and the IFRS represent its standardized language.

Contact Us