Accounting is all of the recording of financial transactions, summarizing, storing and sorting the presented information to analyze and make reports to access how your business is going but these reports should not be distributed outside of the company. Accounting is based on assets and liabilities. Assets are things that you own, that it’s yours and Liabilities are things that you owe to someone. There are many qualifications and subject to accounting. Some examples of accounting:
- Tax Accounting
- Forensic Accounting
- Auditing
- Cost Accounting
- Financial Accounting
- Accounting Information Systems
- Financial Accounting
Every business need to have some sort of accounting because they will need to keep track of everything such as what is coming in and out. It allows us to see how much money you are earning or losing, how much the company is worth and how much money you spend and see what you can do different with your company if it is not going well. Analysing this you will be able to make decisions on your company.
There are 2 types of accounting and they are managerial and financial accounting. With managerial accounting, it is all to do with information that the public doesn’t have to know and it is only for the business knowledge only, such as dealing with your employees’ wages. The payroll is completely confidential, and when working in payroll you shouldn’t discuss anything to do with anyone’s wages. It also deals with the profits that the business makes and the cost of all of the products that are made. With financial accounting, all the information to do with this is allowed to be shared with the public such as customers and stockholders. When doing accounting you are exposed to many risk such as fraud or money laundering, so you will have to take care and be accurate with the inputting of data.
Why is accounting important?
Accounting helps to manage your expenses, makes your keep an eye on all the outgoings and overheads. It is important as it provides information of financial nature to various stakeholders which is intended to be used to make economic decision. Having an accountant will help you save a lot of time if you were to do it on your own if you only know the basics. It helps you cut down on costs as you can see where your money is going. In your business, you should have theses 3 major statements:
Cash flow statement – this shows you the cash inflows and outflows.
Profit and loss account – income statement shows the net income or net loss.
Statement of financial position – this shows you the closing balance of various assets and liabilities and are reported on a balance sheet.
