Utmost care has been taken to ensure that there is no copyright violation or infringement in any of our content. Business trends are projected based on past data produced by accounting system. An important part of any business or organization is, arguably, the money that comes in and the money that goes out. Without accounting, you wouldn’t know how much money your business has earned. For both indirect and direct tax filing purposes, financial statements and other financial information are required. Let’s count the ways. Timely payment of liabilities helps enterprises to be statutory compliant. Closing balance of various assets and liabilities are reported in balance sheet. Accounting is important for business as a way to document financial activity and learn from the numbers. Keeping track of your business’ expenses, debts, and profits keeps you ahead of the curve and ready to anticipate your business’ financial future. In case of listed entities the same is required to be filed with stock exchanges as well. Accounting can be divided into various fields like financial accounting, management accounting etc. Mention deserves to be made about GAAP – Generally Accept Accounting … If so, you can take these steps to keep your business in shape: As any small business owner would tell you, business success doesn’t come from laziness. In most cases, your business has to file a tax return every year. Choose an accounting method (cash-basis, hybrid, or accrual accounting), Keep accurate books (use software to easily record transactions). Generally, you must show investors and lenders your business’s financial statements. In layman term “Accounting is a process of recording, summarizing, analyzing and recording of financial transactions of an enterprise.” Accounting is one of the most important functions of any business enterprise. That way, you know whether your strategy helped or hurt your business. In fact, without proper cost accounting, decision would be like taking a jump in the dark, such as when production of a product is stopped. It is important as it provides quantitative information of financial nature to various stakeholders which is intended to be used in making an economic decision. Business accounting is essential. Answer: In simplest terms, financial accounting The communication of financial information about a business or other type of organization to external audiences in order to help them assess its financial health and prospects. Accounting refers to the systematic and detailed recording of financial transactions of a business. Step one of filing your tax return is gathering financial records. Accounting does just that. In addition to keeping detailed records, you may need to follow a set rulebook for accounting, known as generally accepted accounting principles (GAAP). You can’t skip accounting … but you CAN make it easier. Most of the decisions in a business undertaking involve correct statements of the likely effect on profits. Finance relies on accounting, but while accounting is mainly descriptive, finance is active, using accounting information to manifest tangible results. And after you make the change, you can compare the numbers. Accounting software is like the shelter house for small business. For example, Toys“R”Us has raised over $800 million by is- suing shares of common stock to finance its operations. Your shareholders hold you accountable for the success of your business. Accounting is an often overlooked career, and yet it is a skill that’s used regularly in daily life. But because we touched on this above, we’re going to dive into the second part of accounting and filling out tax returns: the dreaded audit. Proper accounting is important to any enterprise because of the following reason –. Basically it shows cash inflows and outflows among operating, investing and financial activities of an enterprise. Proper business accounting ensures timely recording our liabilities which needs to be paid within the prescribed time line. ERP®, FRM®, GARP® and Global Association of Risk Professionals™ are trademarks owned by the Global Association of Risk Professionals, Inc. CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by EduPristine. Accounting can help. In short, accounting shows you exactly what your business has been up to when it comes to finances. The three major statements which is generated by Business accounting system are as follows: Income statement shows the net income generated/net loss incurred by an enterprise during a particular accounting period. Enterprises are required to file the financial statements with ROC. But why? Forecasting your business needs ahead and planning for purchases and other business miscellaneous will become easier with bookkeeping.