An accounting system is nowadays quite a common word in business. Let us cover the basics concept of an accounting. Accountings is detailed recording, analyzing of financial transactions of medium size business and high-level business.
Accounting is important because it tracks business income and expenses on daily basis and provide financial information for investors and company management which are used for making financial or business decisions.
There are three financial reports on the base of you make decisions.
- The income statement or profit and loss account provides you information about the income level of the business or profit and loss of the business.
- The statement of financial position or balance sheet tell us about the company Assets, liabilities, or owners’ equity of the company.
- The cash flow statement is a bridge between incometatments and statement of financial position and tells us about the cash inflow and outflow.
- Real time decision making
- Future Planning
- Time saving for the entrepreneur.
The groups who run the accounting system of a company are called Accountants. And the company need Accountants for the following reasons.
As accountants records financial transactions for the company and prepare financial reposts which provide proper information for the investor’s owners and government about company current situation of the basis of that information owner can make proper decisions.
As accountants prepare two types of budget estimated and Actual budget for the company based on that budget company set its goals and manage the things accordingly and plan accordingly.
Most the owners thinks that they would not afford accountants but if you think that the time, he spends on recording the transactions he does many errors, and the reports are not more effectively for the company. Instead of doing the transactions has to focus to run his business properly.