IMPORTANCE OF ACCOUNTING
In The Current Business Would, It’s Almost Impossible To Live Without Accounting. Imagine A would Without Accountants? It’s Almost Impossible To Run Businesses or Money Management
WHY IS ACCOUNTING IMPORTANT
Accounting is important not just in businesses but also in personal financial transactions. It helps track the income and expenditure as well as ensure compliance with government regulations which aids in making financial decisions. Income statements track individual or company profit and loss. The balance sheets give a clear picture of the financial position of a company while the cash flow statements act as a bridge between the two. When all three are in order, the business is doing well. The size of the business should not matter when it comes to keeping the company accounts in order.
IMPORANCE OF ACCOUNTING IN BUSINESS
Accounting helps evaluate the performance of a business. The financial records in accounting show all the financial transactions of the business regardless of its size. This will help to know what is going on with the business financially. When an individual or company has clean financial records, they can keep track of their expenses, debts, or gross margins. Up-to-date financial records also give one something to compare with past records so that they know whether their business is making profits or losses. It also helps in appropriate budget allocation.
IS ACCOUNTING REALLY IMPORTANT
Accounting is a very essential tool when comes to money. Most businesses especially those that make huge sales will be impossible to operate since the company has no clue how much they made, how much they spent, or how much they need in order to propel the business into another level.
IMPORTANCE OF ACCOUNTING IN TAX RETURNS
Updated accounting records ensure that the business or individual is in compliance with government regulations. While different countries have different regulations, keeping proper accounting records ensures that one is complying with their country statutory regulations. This is especially important for tax purposes. For one to file their tax returns for their business or personal purposes, they have to gather their financial records. If the records have discrepancies, one will not be able to enter the correct numbers on the returns. In case of an audit by the IRS or any government body, one should ensure that they have enough evidence of due diligence on their part. While an audit is dreaded, the result depends on one’s diligence.
IT IS A TOOL USED TO CONVINCE INVESTORS
Keeping accounting records ensures that one is accountable to themselves and others. When there are shareholders and investors involved, it is much better to show them rather than tell them how the business is doing. The accountant or accounting department Is held accountable by the management and shareholders for the company finances. They learn about any growth or decline from the financial records. One can also hold its employees accountable through the accounting records. If there are fraudulent transactions in the company, one can find them before they present a bigger problem in the company.
ACCOUNTING IS IMPORTANT IN GUIDING FINANCIAL DECISION MAKING
Every purchase to be made should depend on the availability of funds. Keeping good financial records shows what can be afforded at any particular point. If there are expenses that should be cut to help keep the business profitable, the financial records help with that as well. Having accurate records helps prevent bad financial decisions in a business or personal account such as overspending, plateauing,and underspending. These can be troublesome and lead to failure in business. Having bad financial records is a red flag to investors, stakeholders, banks and the government. This is why it is important to keep up with one’s finances.
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