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Why Accounting Required !

Accounting functions as the foundation of a company in numerous ways. Its responsibility is to keep track of a company’s finances in all their various manifestations, including payroll and tax filings as well as credits, debits, and profitability. Analytical interpretations and analytics are what drive this field. The data obtained from these operations provide a thorough account of the stability and health of a company’s finances. The financial reports that are produced using this data can influence a company’s short- and long-term strategies.


Need For Accounting | Requirement For Accounting

Accounting is a must need in this global era, since it is impossible to remember all transactions happened & to communicate it to others. When transactions are recorded, you are able to look up and retrieve details about a specific transaction whenever you need to. Financial accounting enables us to study and measure the performance of a business over a period of time.

Accounting serves statutory requirements. Proper accounting helps organizations ensure accurate reporting of financial assets and liabilities. Tax authorities, use standardized accounting financial statements to assess a company’s declared gross revenue and net income. The system of accounting helps to ensure that a company’s financial statements are legally and accurately reported.

Accounting facilitates interpretation, analysis & comparison for both internal and external users. Records of financial accounting support decision-making at all organization levels. The financial information relevant to their area of operations is used by management at all levels to make decisions. Finding the more cost-effective supplier can be all that is required to make these judgements. These reports are used by managers to increase the profitability and efficiency of the business. Using financial accounting information, important choices could be made like moving the company’s operations to a new site. Correct reporting also makes it simpler for management to prevent mismanagement and losses.

Accounting helps in ascertaining profitability and financial position of an enterprise. Financial accounting reports assess and gauge a company’s financial success and failure. Owners of businesses can determine precisely how much profit or loss the company has generated over time. Many facets of business performance can be measured using key performance indicators (KPIs). To examine the historical performance of the business, these KPIs can be examined across time. It can also be used to evaluate businesses against one another. Regularly reviewing reports enables the business owner to spot possible issues and bottlenecks early on and take appropriate action.


Objectives of Accounting

Accounting helps in keeping systematic record of financial transactions i.e. purchase, sales, cash receipts & payments. One of the primary accounting purposes is to maintain a systematic record of all financial transactions in an entity’s books of accounts. All transactions have been entered into the Journal in chronological sequence for this purpose and have since been posted to various ledger accounts.

Accounting helps in keeping proper records of income & expenses which facilitates ascertaining profit/loss of business. Every business is founded with the intention of making money. Profits, as a rule, serve as the foundation of any company. Also, many who use financial statements are particularly interested in occasionally learning the net results of corporate activities. We create a document called a “Profit & Loss Account” or “Statement of Earnings & Losses” to determine if the company is profitable or losing money.

Accounting helps in ascertaining financial position of an entity. We can determine our company’s precise financial situation at a given time by accounting for all of the assets it owns and liabilities it has incurred. To check the worth of assets and liabilities in this regard, we construct a “Balance Sheet.”

Accounting helps in preparation of various reports required for internal management, outside parties & government authorities. Financial statement users are crucial to the business. The decision-making process of the user of the financial statements may be impacted by the entity’s financial statements. They take part in future corporate expansion as well. One of the most crucial goals of accounting is to provide information to the various interested parties or stakeholders because it aids them in making wise financial decisions. Accounting may help management manage day-to-day business operations successfully by assessing financial data of an entity and delivering interpretations in the form of reports.

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