What are the Roles of Accounting in a Business?
by
Kevin Jeffersons
Accounting, a system for measuring and summarizing business activities, interpreting financial information, and communicating the results to management and other stakeholders to help them make better business decisions, is said to lie at the heart of every business.
A business can likely survive, for a while at least, with no effective marketing plan, poor human resource management and indeed a poorly designed business strategy. However, it s impossible to run an organization or make sound investment decisions without accurate, timely financial information; this is what the accountant prepares, summarize, interpret, analyze and communicate.
On the positive side, good accounting, along with financial management, can truly help keep the business under control; it also provides the owners, management and others with the information and the confidence to make the bold decisions and take the opportunities to help the business grow. This is because accounting basically functions in recording and provision of financial information to the individuals who run the company.
Important Functions of Accounting
Accounting Functions are divided into 5 Main Functions:
-Record Keeping Function. This involves the creation of financial records of business transactions, keeping a systematic record of financial transaction – journalization, posting and preparation of final statements. This is done in order to be able to create financial statements to report regularly to the interested parties.
-Protection of Business Property. This involves protecting the property of business from unjustified and unwanted use. The accountant thus has to analyze flows of finance of the company and design such a system of accounting which protects its assets from an unjustified and unwanted use.
-Legal Requirement Function. This involves devising such a system that will meet the legal requirements. Under the provision of law, a business owner has to file various statements such as income tax returns, returns for sales tax purpose etc. These tax statements can be determined by using accounting system that follow the requirements of law with the help of which various returns, documents, statements etc., are prepared.
-Communicating the Results. Accounting is considered to be the language of business. There are various transactions that are communicated through accounting. On the other hand, there are many parties such as owners, creditors, government, employees, etc, who are interested in knowing the results of the firm. This is where communicating function of accounting becomes involved as accountants need to assess and analyze the financial position of a business at a particular moment in time basing on the financial information gathered. And then, the accountants can communicate the meaning of financial information and work with individuals and organizations to help them use financial information to deal with business problems.
-Getting numbers is the easy part of accounting, particularly since the introduction of the computer and the numerous numbers of online or web-based accounting software solutions that one can avail out in the web, either for free or with a fee. The hard part is analyzing, interpreting, and communicating information and doing so clearly while effectively interacting with people from all business disciplines.
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Article Source:
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