Today let us try to understand why do we need accounting or importance of accounting. Many of us have read and have also understand accounting but yet we fail to tell or understand why do we need accounting or we may tell that just to know the profit or loss. No accounting have much more to do then that. Let us see in this article the need of accounting.
Need of Accounting
Accounting is one of the most important activity in any business. In generally accounting helps us to keep a track of business income and expenses in a systematic manner which will help us in various activities of financial management such as planning and forecasting, proper taxation, assessing the business performance and many more such activities. Today in this article let us see what is the need of accounting and why is accounting important.
§ Business Forecasting:
Every business tries to forecast and plan based on the past experience and present practices for future planning. It helps to make informed decisions with respect to forecasting. It also helps in expansion of business operations by facilitating the present financial position and also need for expansion in operation. It also provides information for production department regarding the quality and quantity to be produced and also the effectiveness and cost in production so that the production department can take respective steps in order to
Every business tries to forecast and plan based on the past experience and present practices for future planning. It helps to make informed decisions with respect to forecasting. It also helps in expansion of business operations by facilitating the present financial position and also need for expansion in operation. It also provides information for production department regarding the quality and quantity to be produced and also the effectiveness and cost in production so that the production department can take respective steps in order to
§ Correct Taxation:
A business has to pay various taxes like sales tax, IT, excise duty, VAT and many more. So in order to assess the taxes to be paid and it all depends on the financial statements which are been prepared. Thus accounting helps in correct calculation of tax by providing required information
A business has to pay various taxes like sales tax, IT, excise duty, VAT and many more. So in order to assess the taxes to be paid and it all depends on the financial statements which are been prepared. Thus accounting helps in correct calculation of tax by providing required information
§ Assessing the Performance of the
Business:
Accounting helps in keeping financial records in a systematic manner of all the business transactions .This facilitate a business to assess the profits and losses occurred, cost of operations, investments made, cash movement and much more. By clearly able to assess the performance of business it helps in providing sufficient required data for the top level management for planning and forecasting activities.
Accounting helps in keeping financial records in a systematic manner of all the business transactions .This facilitate a business to assess the profits and losses occurred, cost of operations, investments made, cash movement and much more. By clearly able to assess the performance of business it helps in providing sufficient required data for the top level management for planning and forecasting activities.
§ Documentary Evidence:
Accounting provides records which can be used as evidence in court and also supports the financial statements prepared by recording all the business transactions. All the records are based on documentary proof.
Accounting provides records which can be used as evidence in court and also supports the financial statements prepared by recording all the business transactions. All the records are based on documentary proof.
§ Preventing and Detection of Frauds:
A proper accounting system helps in effective management or arrangements for the internal checks to prevent leakages of goods and cash. Accounting not only helps in detecting frauds but also exists responsibility for it and also prevents employees from committing frauds.
A proper accounting system helps in effective management or arrangements for the internal checks to prevent leakages of goods and cash. Accounting not only helps in detecting frauds but also exists responsibility for it and also prevents employees from committing frauds.
§ Correct Decision Making:
Every business or a firm has to take many decisions in order to execute the plans and also make profits and run the business or a firm successful. Thus in order to make a informed decision we need sufficient data and which is provided by accounting by maintaining the records of all the business transactions. Thus a proper accounting system facilitates in making informed decisions.
Every business or a firm has to take many decisions in order to execute the plans and also make profits and run the business or a firm successful. Thus in order to make a informed decision we need sufficient data and which is provided by accounting by maintaining the records of all the business transactions. Thus a proper accounting system facilitates in making informed decisions.
§ Replacing Memory:
As there are innumerable varied and complex business transaction takes place it become impossible to remember every business transactions. Thus accounting records all transactions. Thus it become easy and not necessary to memorize all the transactions.
As there are innumerable varied and complex business transaction takes place it become impossible to remember every business transactions. Thus accounting records all transactions. Thus it become easy and not necessary to memorize all the transactions.
§ Assessing the Financial Status of
the Business:
By analyzing the financial statements we can assess the financial position of the firm or organization. The financial statements are being prepared at the end of the accounting which reflects the true position of assets and liabilities of the business.
By analyzing the financial statements we can assess the financial position of the firm or organization. The financial statements are being prepared at the end of the accounting which reflects the true position of assets and liabilities of the business.
§ Assisting in Realization of Debt:
As in accounting personal ledgers are prepared which helps in giving exact information regarding how much amount is due from the respective debtors. The statements of accounts are send to verify and also to make early payment of due amounts.
As in accounting personal ledgers are prepared which helps in giving exact information regarding how much amount is due from the respective debtors. The statements of accounts are send to verify and also to make early payment of due amounts.
§ Helpful To Management:
Accounting helps management in various aspects such as assess the achievement of its performance, comparing actual performance with the desired performance, weakness of the business so as to take corrective measures to overcome them. It also helps management in analyzing the effectiveness in the operation of the business.
Thus after studying we can conclude that accounting has a very vital role to play in any business activity since the main objective of the business or firms revolve around money. Thus accounting is one of the basic and most inseparable part of the the business.
I hope that now after you have gone through this article you have understand the need of accounting in detail.
Accounting helps management in various aspects such as assess the achievement of its performance, comparing actual performance with the desired performance, weakness of the business so as to take corrective measures to overcome them. It also helps management in analyzing the effectiveness in the operation of the business.
Thus after studying we can conclude that accounting has a very vital role to play in any business activity since the main objective of the business or firms revolve around money. Thus accounting is one of the basic and most inseparable part of the the business.
I hope that now after you have gone through this article you have understand the need of accounting in detail.
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