Need and Importance of Accounting
Accounting can be referred to as the systematic and comprehensive recording of a financial transaction relating to any business. Also refers to as a process of analyzing, summarizing and reporting these transactions to the tax collection agencies and oversight agencies.
Accounting helps the management to be able to ascertain the financial position of the business. With all accounting activities, the final report provided helps management to know the business position so they can be able to know which direction they are ending.
Accounting is very important and needed for any business transactions. It helps in recording, classifying and finally summarizing the transactions in a business. This enables coming up with a well analyzed financial document like balance sheet, trial balance among others when accounting is done properly within the business transactions.
The Importance Of Accounting
Accounting helps in decision making, planning, and controlling processes. It's with the help of accounting there will be documents which will be factored in carrying out these processes. Again with these methodical documents, they help in reduction of theft and frauds.
Availability of accounting in any business transactions ignites the business to run with efficiency, effectiveness and accuracy manner on all the activities undertaken. This leads to more productions since the management will make the right decision and proper planning due to the good flow of transactions in a business.
Importance of Accounting in Business Organization
A business organization involves an individual or a group of people who collaborate so as to achieve certain commercial goals.
Planning Budget
Budgeting is a core factor in every business. Planning budgets help business to make strategies, save money and noticing any expenditure exceeding the budgeted amount. To make a budget you need various previous records. In order for these documents to be available, they must be very well maintained through accounting since they are the basis of planning and making budgets.
Banks and lenders
In order to get any loan from the financial institution, you must be able to present your financial status in acceptable order. So in order to make it, you need to have proper accounting system so as to present various books of records such as profits recorded, assets and liabilities, taxes paid among others. Financial institutions will scrutinize them carefully before landing to a decision of awarding loan.
Keeping Records
Every business needs to keep records and act upon them in order to run smoothly. In this case, accounting plays a big role in keeping records. All records are collected, organized, and interpreted in order to be communicated to the end users, therefore helping in making an economically viable decision which will lead to the positive productivity of the business organization.
Decision Making
Any economic or any decision regarding the business organization is made depending on the financial statement of the organization. A financial statement is as a result of accounting. Without proper accounting in a business organization, the executives can't make a sounding decision since they will be operating in blindness hence making it impossible to achieve organization objectives.
Information to Investors
Financial statements and accounts are used to represent the organization to the stakeholders such as debtors, creditors, government, and investors, customers and employees. Many investors will run away from your organization if you lack financial records and accounts to presents so as they can know the business progress.
Reporting Profits
The key objective of any business is to make profits. Every business, being a small or large organization, must maintain accounting system so as they can ascertain what they are making on their business transactions. This also enables interested parties to make the decision on the progress of the business productivity.
Managing and Monitoring Cash Flow
Proper accounting systems will take care of working capital and any other cash requirements within the business organization.
Tips
You may also want to read up on some of our other very informative blog posts and learn Introduction To Investing or if you are thinking of investing and building your own portfolio you can check out Learning The Stock Market.
