Meaning and Importance Of Accounting
Accounting is essential for maintaining records in a business. Accounting is a key function of any business. It's the systematic recording of all financial transactions for a business. This includes summarizing, analyzing and reporting financial transactions to regulators, tax authorities, and agencies.
Accounting is the process of accounting a business. Accounting statements are detailed statements of financial transactions that have occurred over a period. These accounting statements summarize the company's financial situation, operations and cash flows.
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Importance of Accounting
A budget plan can help a business make savings, strategize, and manage expenditures that exceed the budget. A business must have financial records in order to create a budget. Accounting keeps accurate records of financial statements which help to create a budget for the company.
To get loans from banks
For banks to lend money, a business must present its financial situation to them. An accounting system that is accurate will allow you to show the business's current financial position, its assets, and liabilities. Before granting loans to a business, banks and financial institutions will review the accounting statements.
Take a decision
The financial statements are used to make business decisions. For a business to run smoothly, it is essential that they keep accurate records. Accounting helps you make the right decisions and keeps track of your financial records. Accounting records can be compiled, analyzed, and interpreted to help make an economic decision for your business.
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Information for Stakeholders
Financial statements and accounts are financial information that is provided to business stakeholders, such as customers, creditors, debtors and employees. Investors and government officials can also access these financial reports. To understand the company's progress, investors will need financial information from the accounts. After reviewing the financial statements, the investors will approve the funding.
Accounting is essential to determine the company's profits. Every business, no matter how small or large in size, needs an accounting system to determine its financial position. It allows interested parties to monitor the business's progress and productivity.
The Advantages of Accounting
Accounting has become an integral part of a business or organization over time. Without accounting, no business entity can survive.
1 - Management Tips :
The "Accountancy” process generates information that allows the company's management to do their job efficiently by planning, monitoring and making decisions for the benefit of the company.
2 Assistance to an Insolvent Person:
If an individual becomes insolvent, he must explain the details of the business activities he has undertaken while running the business. If proper books of accounts were kept, this process can be extremely difficult.
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3) Sale to Business:
If a Businessman decides that he wants to sell his business, he must maintain accurate and current books of accounts. This will help Lee estimate the cost of setting up the business and finalizing the "Purchase price" by the buyer.
4) Substitute for Memory:
Accounting requires that all business transactions are recorded in a particular and classified way. This eliminates the need for a business organization to remember every transaction.
5) Comparative Study:
The "Accounting" financial statements are Profit & Loss Account and Balance sheet,which allow the company's management to see the year-to-date results and take the necessary actions for growth.
6) Statement on Taxation Liability:
Maintaining proper books of accounts will ensure that tax liabilities are not overlooked by government departments, especially those dealing with Income Tax, Service Tax, and Sales Tax.
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7) Evidence before the Court:
In the court of law, a systematic record of all business transactions can be presented as evidence. These records are often accepted by courts as evidence.