It is very common to hear the word “Accounting” nowadays. That’s because this is how important it is today. Especially in the world of business. Accounting and Business are like Bread and butter. You can’t have one without another. In small businesses or large businesses, you will find one thing common. And that is Accounting and Accountants. Accountants typically have qualifications and expertise that bookkeepers do not. Accounting is a complex subject and so is used to deal with complex systems. Later in this blog, you will get to know more about why accounting is important? But hey, first things first. What is Accounting?
WHAT IS ACCOUNTING?
Accounting is the act of combining financial data to make it transparent and understandable to all stakeholders and shareholders. Accounting’s major objective is to keep track of a company’s financial transactions, financial performance, and cash flows.
- i) Financial Accounting.
- ii) Managerial Accounting.
FINANCIAL ACCOUNTING: The creation of accurate financial statements is a part of financial accounting. Financial accounting focuses on correctly measuring a company’s performance. While financial statements are intended for use by the public, they may also be used by internal management to aid in decision-making.
MANAGERIAL ACCOUNTING: Financial accounting gathers data, which is then analyzed by managerial accounting. It refers to the process of creating business reports. The reports are used by the management team to help them make tactical decisions.
WHY ACCOUNTING IS IMPORTANT?
Here are a few reasons why Accounting is important.
KEEPS TRACK OF ALL COMMERCIAL DEALING: Accounting’s principal function is to keep a systematic, accurate, and comprehensive record of a company’s financial activities. The accounting system’s backbone is made up of these documents. When necessary, business owners should be able to recover and examine transactions.
IT HELPS IN DECISION MAKING: Accounting is particularly essential for the organization’s internal users. People who plan, organize, and operate businesses are examples of internal users. Accounting is required by the management team while making crucial choices. Choosing to seek global growth vs improving operational efficiency are examples of business decisions.
IT KEEPS A BUSINESS ORGANISED: Investors, lenders, and workers are just a few of the people that are interested in a company’s financial data. Certain sorts of organizations, such as charities, benefit from being as open about their finances as feasible. If your documents are untidy, it can harm your reputation as well as the health of your company. These frequently complicated records are structured by an accounting system so that they can be easier to access and provide to the groups involved.
HELPS YOU DETERMINE BUSINESS POSITION: The financial records of a company indicate its overall health. Financial records include information on costs, gross margin, debt, and more to help you understand how your firm is performing. A solid accounting system also simplifies looking back and making can you buy valium over the counter in new york? comparisons in the past. You can observe whether or not things are better.
Business owners may use accounting reports to assess how effectively their company is functioning. Financial reports are a solid measurement source for the major indicators of success so both business owners and rivals may compare their performance.
LEGAL REQUIREMENT: Good accounts and practices assist to maintain the legal status of your company. One of an accountant’s major responsibilities is to manage the financial affairs of the company in accordance with numerous laws and regulations. Because the financial records of an organization may be audited at any moment, they must be accessible, accurate, and well-organized. Your firm might be in serious problems if you don’t keep excellent records.
YOU CAN GET MORE DEDUCTIONS WITH GOOD ACCOUNTING.
It might be difficult to determine what you can deduct during tax season. Making the process easier is having an accounting system that records your organization’s finances throughout the year. An accountant might also flag up deductibles that you may be unaware of. Both businesses and people will benefit from this.
WHY IS ACCOUNTING USEFUL FOR SMALL BUSINESS.
Accounting is critical for small business owners for the reasons listed below.
- Keep an eye on your financial flow. You should adopt procedures for effective record-keeping and a good financial plan to keep your firm’s cash flow from drying up.
- Cost accounting can help small company owners grasp the principles of fixed costs, variable expenses, and how to correctly cost their project. In this manner, you won’t lose money on a project you believed would be profitable.
- Accounting allows you to have a better understanding of your company’s health. You may accomplish this by reading a balance sheet, a statement of revenue, and a statement of cash flow.
- Aids in the detection and prevention of consumer, employee, and supplier fraud and theft.
CONCLUSION.
These were a few reasons why accounting is important. We hope you find this blog helpful. And leaving us with a smile:).
FREQUENTLY ASKED QUESTIONS (FAQs)
- What is Accounting?
Ans. Accounting is the act of combining financial data to make it transparent and understandable to all stakeholders and shareholders. Accounting’s major objective is to keep track of a company’s financial transactions, financial performance, and cash flows.
- Why is Accounting important?
Ans.
- Keep an eye on your financial flow. You should adopt procedures for effective record-keeping and a good financial plan to keep your firm’s cash flow from drying up.
- Cost accounting can help small company owners grasp the principles of fixed costs, variable expenses, and how to correctly cost their project. In this manner, you won’t lose money on a project you believed would be profitable.
- What are the two types of Accounting?
Ans. The two types of Accounting are Financial Accounting and Managerial Accounting.
