What is accounting and why does it need it?
Accounting only occurs when people engage in business and exchange.
This makes sense, if we want to do business with each other in any kind of organization, we need a system to track all transactions and its transitions. And that’s why accounting is needed. Double entry in accounting comes from medieval Europe, which is quite complex. Fortunately, nowadays we have the handy accounting software to help manage our financial records without having to rely on completed manuals and complicated spreadsheets.
Types of accounting
There are two basic types of accounting: financial accounting and management accounting. Financial accounting focuses on information that is disclosed to shareholders, customers, creditors, and regulators. Management accounting focuses on information that is not shared with the public, such as wages, profits, and costs of manufactured goods. The goal of accounting management is to help managers make financial decisions, while the goal of financial accounting is to provide important financial information about your company to outsiders. of the business. For most small business owners, the word “accounting” is financial accounting, and for larger business owners the word “accounting” is the management accounting.
Accounting help you do?
Accounting is essential if you want to grow your business at your fingertips and you can measure and predict. Having a business ‘tracking system’ of assets, liabilities, and income allows you to make smart business decisions based on the business performance you have accomplished and the current financial health. of your company. With a clear accounting system, your organization not only can analyze your company’s financial data but also help it grow and increase profits.
Accountants will also help you satisfy your customers, helping you understand the financial position your company has on the relationship between Revenue and Cost, which will help you better understand what you are. Need to do in the future to maintain the level of customer satisfaction and grow your business.
Need more evidence to convince you?
Accounting also helps you keep track of who owes you, what you owe to others, manage payroll records, track your payments and pay interest, attract potential investors, maintain your operating budget. , and perhaps most importantly for most entrepreneurs is the financial data that you need when calculating your company’s taxes.
Who handles the accounting of your company?
It really depends on the size of your business and how fast you expect your business to grow. Public companies will usually appoint a CFO to handle the company’s finances. Other companies usually hire an accounting firm that provides accounting services to do the accounting work for you. It is important for entrepreneurs to have a good grasp of corporate finance, especially in the early days of business. Professional accounting software, good accounting software will make accounting work done much better.
The importance of accounting
You sometimes find it unimportant and costly for accounting, but it will be very helpful if you want your company to grow sustainably. Imagine that you are running a company where you do not have any accurate information about your company’s financial position, how you will handle it in business decisions, or on a day-to-day basis. That stockholder you query, may also be the tax office, the government audit. Therefore, you need a professional accounting service provider to do this properly and permanently.
While accounting allows you to do all the great things, it is also extremely valuable in controlling risk. When accounting is done properly, risks such as fraud are significantly reduced. And if the government audits your company, your accountant will be your best friend. In other words, accounting is the credibility of the business world.