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Importance Of Accounting In Business < Business Articles By Mast Business Directory

In the today’s world out of all the disciplines available, accounting is the one which every person should keep some knowledge of. Its concepts can be readily applied to all aspects of any project, by person having any designation in the company, be it manager, secretary, engineer or a field worker. Its nature and application being realized with certain degree of importance in the corporate world and can be used by people in their common lives. Especially in the corporate world of today accounting seems more important owing to how people from every department and designation are held more responsible for their own actions and work in the company. We shall look at various importance of accounting in the article to follow.

Importance of accounting in business

It is of keen importance that the knowledge of accounting should be possessed by people from all backgrounds. Generally, it is expected that only people from business administration background should possess such skills and virtues related to accounting. Accounting skills are required to understand how the performance of a company is in the past, present and the future. Accounting can be used to determine the accuracy with which money is not wasted and integrity of any business organization. Executives can base their key decisions about any business using the financial statements that reveal accounts in a company. Unintentional misstatements occurrence can be conveniently avoided. Not only MBAs, but also people from diversified and different backgrounds should acquire accounting concepts’ knowledge personally.

Accounting can enlighten you on how, where and when should you invest your money, help you in the assessment of the interest rates available for example paying off your education or a house mortgage loan and calculate those easy monthly installments for your car or motorcycle. Accounting is the basic and the key framework that any business is built upon. In our day to day life, we perform various activities which are directly based on accounting principles and are inevitable. When the students make the transition from their university life to an entry to the business world, accounting is inevitable and can work wonders when proactively learnt.

Employees in business organizations should acquaint themselves with basic fundaments on which accounting are implemented in these companies. Companies can expand and grow their capital base. Implementation of proper accounting practices and methodologies can be good to improve the profit/loss structure, establish good news for the company in the share market, use a certain portion of the money for certain prospects and apply it wisely in investments on which the companies’ future can thrive upon. The objectives that the company has developed in the past few years can be recognized and easily achievable through good set of accounting practices used by the companies in their various financial aspects e.g. buying and storage of raw materials.

Perhaps the basic definition of accounting is simple. Accounting, put in simple words is nothing but the data that a company makes it available to its users, investors, employees and shareholders. A business entity exists and is able to run owing to the mentioned of people who invest or work in the companies providing their services to some or the other degree. Any business is based on a sole underlying motive or principle i.e. profit. Accounting is a branch which enables the companies to fulfill the reason for their basic existence. Accounting information is very much essential for a business to manage and take a control of the resources utilized and the finances which are applicable. The degree if profit-earning can be substantially worked upon and enhanced. Accounting makes a company realize the decline in its profitability level. Marginal liability and marginal assets and the difference between them can be understood.

In the modern society, accounting is used widely. Young males and females look forward to develop a career in accounting. They want to transform into accounting professionals and get hands-on experience in accounting. This is so as to get a shot at the top positions in the industry. Once you enter an accounting stream in a reputed company, you start to manage the finances in company, the various investment options, evaluate the business insurance policy, interest rates of your debts and options to direct the flow of income into the company. Accounting is so vital owing to its need for a diversified group of people ranging from the receptionist who welcomes you at the desk to the manager who handles all the staff. It is also used by the Government to evaluate its borrowing options and levy of taxes on various groups of incomes, goods and services. A business organization can seldom run its day to day operations without the use of accounting. Existence of accounting is something which is felt in every sector of any business conducted. The nature of the account keeping tools varies according to the size of the business. It can be as simple of a pen dipped in an ink-pot and a register to record all the transactions to complex accounting systems used in big companies which includes software in the form of friendly graphical user interfaces which can be operated only after a detailed and intensive training session in the company.

Accounting forms a vital element of any business. The growth of the business can be recorded and important figures which determine success of business organizations can be closely monitored and analyzed. Placing of figures in the ledgers is called “bookkeeping”. Perhaps you must have seen large sheets of paper which are marked or ruled with red and green ink lying on the table/desk of your manager. These are none other than books of accounting.

Data related to financial records is handled via private accounts in a large business enterprise or an organization which runs with a purpose which is not for making profit (non-profit organization). Accounting need is felt in other concerns related to areas of manufacturing, sales etc. These are collectively termed as industrial accounts due to their industry-specific needs. Accounting professionals can make their way easily into almost any branch of the company, federal state, local government and organizations that are owned and run by the government. Thus accounting sector has demand in every industry. A single kind of accounting service is specialized upon in government/ private organizations but they can do well in any type of accounting service that is mentioned in the discussion above. It is easy and not so unusual for accounting professionals to achieve excellence and have professional skills related to a very narrow sector in an industry. This can include branches like transportation, manufacturing, sales, management utilities etc.

A management that is well-organized is needed in the today’s corporate world. These companies usually hire a special type of accountant called as managerial accountant. This very kind of accountant is trained by the company to become a manager one day. Managerial accountant is provided training on various aspects like employees’ structure within the company, products developed by the company, various plants that the company possesses or leases, equipment used by the companies to put forward their production in the market etc. These people are well trained to possess qualities that will enable them to develop their management skills and handle responsibility at the top management level.

Fraud in the account books is a major concern which gives rise to most of the biggest public scandals. Businesses are known to record the statements of financial transactions which are popularly termed as bookkeeping since as long as 70 centuries ago! And that’s only as far as the records in the history books that are made available to us. By taking a good look at the account books of the company, we can very well determine the assets and liabilities of the company. Account books provide us with a projected view about how the company is going to perform in the next few years. It gives the shareholders an idea about if they should withhold the shares or sell them before the company faces loss and starts giving scarce income. Accounting is one language that is universal to any type of business, spread across any part of the world. The people who are able to fully demonstrate their master skills in this language are called accountants. Business executives will be as good as blind if kept away and have no access to accounting information systems in the form of financial statements. A fruitful decision could be arrived at through accounting since the well-informed economic decision can be made from account books where the information is collated, interpreted from a range of sources. Account books when properly utilized help in the prevention of fraud. They help us to track down to a single transaction possibly entered in a suspicious or ambiguous manner that can lead to a major fraudulent activity in the future. You have to produce your last few years’ balance sheets in front of the banks or any other financial institutions which gives them an overview of your credit history and arrive at decision if you are capable or incapable of paying back their loan. Thus we have explored various factors that are dependent only on accounting or results that are derived from accounting books. The importance of accounting and bookkeeping has been a tradition of the past, present and the future and it is one single utility in a business that is unmatchable.

PK Group : The PK Group have expertise in accounting and financial planning. Based in London their groups of advisors can help you and your business with all types of financial help.

Best Books to buy on Accounting

Managerial Accounting

College Accounting, Chapters 1-24

Accounting For Dummies

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