Attributes and Purpose of Accounting
Accounting is the mechanism for reporting financial transactions linked to a business. The accounting process involves the review, examination, and reporting of these activities to supervisory authorities, regulators, and tax collecting bodies.
In order to assess its financial viability and operational profitability, governments, borrowers, venture capitalists or institutional investors often examine the accounting reports of the company.
It is usually performed by a corporation’s internal audit department, then reviewed by a qualified accounting company. Small firms have often published far less annual results in the accounting cycle as compared to big firms.
Major Points About Accounting
- Accounting helps to assess a company’s performance, financial position, and cash flow. This knowledge is then used to make decisions on how to run or invest in the company
- Two types of accountings are basically there, management and financial
- Management accounting plays a vital role in helping administrators to fulfil their duties. As the information it offers is intended for use by people doing a wide range of work, the reporting style is versatile
- Financial accounting is responsible for preparing the financial statements of the corporation — including the income statement, the owner’s equity statement, etc.
- Accounting aims to document all business transactions and when the businessman reviews the report he will quickly identify it and use it for business purposes.
- Company will determine the right financial status, if the businessman reports both accounts assets and liabilities.
- Knowledge of accounting makes the assessment of tax easier
- Through accounting, businessmen can quickly figure out what sum his debtors owe, and what sum his investors owe.
- If any conflicts between two parties are placed in court. Then account books may be presented as facts, the court recognizes such documents as proof of the transaction.
- Country will also grow with accounting assistance, provided all the businessmen report correctly. With this, the black money and massive amount of tax can not be spared, the government can use such funds for nation’s development programmes.