The type of business problems accountants are confronted with are varied and complex. These can be broken down into abstract form and consequently analyzed through mathematical means. Whether it be mathematical modeling, forecasting, statistics, calculus, to name a few the need for mathematical knowledge is paramount to providing the accountant of the 21st century the necessary tools for problem solving. Accounting is a science of logic and mathematics is its language.
At its core, let us consider a simple tax payment routine which connects math and accounting:
- A $13,000 per taxpayer basic personal exemption
- A 17% tax rate on every dollar earned past that $13,000
Economists refer to the 17% tax rate as a marginal tax rate, as it is the percentage you have to pay when you earn an extra dollar of income.
A man earns $30,000 a year. His marginal tax rate is 17% because he earns more than $13,000. His average tax rate will be different, as he is exempt from paying taxes on the first $13,000 he earns. Thus he has to pay 17% on the remaining $17,000, which is $2890.
|An accountant takes care of the tax payments, lenders and money management for any particular company. It is important to keep track of the debtors and creditors of the company. If the creditors list is bigger than the debtors, the company’s growth may be declining. If the debtors list is bigger, the company might show a good progress in a shorter period.
Any business requires records of profit and loss. This information helps the company to make important decisions regarding their business strategy, price of their services and products, the number of people to hire, their expenses, the output rate etc.
The price at which one buys products or raw material is called the cost price.
The price at which one sells the products or services is called the selling price.
A seller gains profit if the total selling price is greater than the cost price.
Profit= Total Selling Price – Total Cost Price
Loss = Total Cost Price – Total Selling Price