Question

Why are managers expected to have sound knowledge of accounting in managing their business

please answer this question in a professional manner.

Answer 1

In the competent world of business, managers are expected to have sound knowledge of accounting in managing their business.

As managers have responsibility to manage the business efficiently, they are expected to have accounting and management skills. They need to have accounting and finance skills. They have the responsibility to adhere to laws, rules and regulations applicable to the business.

Managers for their day-to-day working of the organisation have to communicate with the vendors, customers, banks, investors, government authorities, etc. If the managers have knowledge of accounting and finance skills, it will be helpful for them to understand the requirements of business. They can use techniques to negotiate with vendors and customers for selection of best product/service, its pricing policy and understand the payment/receipt system. They can learn how to deal with banks for loans borrowing and its repayment .

Nowadays, business managers need to know how to prepare financial reports that provide company's performance information. As the managers present the reports before the shareholders, investors and other members of the company, they should have the knowledge of the reports, Even if the financial reports are prepared by any other person than manager, it will not save him from having a brief overview of the same.
Competent managers should know how to read a balance sheet and profit and loss statement. Reading the reports mean a manager should have the knowledge of every line item of the financial statements, which will help in making sound financial decisions relevant for the company.

Managers need to make many financial decisions on a day-to-day basis and lack of financial skills will affect their decisions. As a result, resources such as personnel's hardwork get wasted, poor decisions are made, communication is affected and the organisation suffers.

Hence, for the smooth functioning of the organisation, it has now become essential for managers to have sound accounting knowledge