Question

why is sport management to important accounting

What sort of transactions would you encounter in that field? What are the impacts of those transactions on the business? List and describe several examples.

Answer 1

Accounting is very important for the field of sports management. This is because accounting helps the sports managers to understand the financial performance of their teams in a systematic and tangible manner. Accounting in the field of sports management will lead to a better quantitative understanding of the performance of the team by recording and then analyzing data with regards to payroll accounting, merchandising accounting, revenue and expense accounting etc.

The sort of transactions that will be encountered will be transactions related to revenue from different sources like sponsorship, membership fees, ticket fees etc. Expenses will be in the form of operating expenses, interest, depreciation, payment to players, staff salaries etc. Besides there will be merchandise related transactions, payroll related transactions, capex (i.e. capital expenditure) related transactions etc.

These transactions will have a direct impact on the business. All business entities are recognized as ‘going concerns’ in accounting and so will be the case with regards to a sports team. In other words business will be regarded as one that will function without the threat of liquidation for the foreseeable future and hence the focus will be on operating and making a profit on a consistent and sustainable basis.

Examples:

• Merchandise related transactions – A sports team generates a significant part of their revenue from merchandise sales. The transactions related to merchandise will entail the pricing process, maintenance of optimal level of inventory etc. The impact will be to maximize revenue generations.
• Payroll related transactions – This will involve payroll aspects like payment to players, managers, coaches, assistant coaches etc. The impact of accounting for payroll related transactions is that it will help the sports team to better manage and control its costs.