Why do we need accounting?

by David

I was wondering why do we need accounting, whether it is really necessary for business to have accounting in place and what are the benefits?

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Nov 10, 2009 Overviewe why we need accounting by: Ana Orwel To answer this question we need to understand what is the most important role of accounting. The main objective of accounting is to capture, analyze, record and report data on the transactions which had an impact on the financial position of the organization during certain period of time. From this we can see that the result of the accounting process is provision of certain information in the certain form to the persons or entities using this information to make decisions related to the organization. There might be very wide range of persons and entities, using information provided by the process of accounting. 1. For example, business owners are interested in the profit the business earns and value of the shares in the business. Accounting gives them this information 2. Suppliers which supply goods to the business are interested whether the company will be able to pay for the goods they have supplied to it. Accounting gives this information to the suppliers. 3. Banks and other creditors are interested whether the organization will be able to repay loans and pay interest. Accounting again provides information on the ability of the organization to pay its debts on time. And so on, other users of accounting data can be customers, employees, tax authorities and other. Accounting plays vital role in any organization while recording and reporting financial data on the activities of the organization. Without accounting we as the parties interested in the results and success of operations the organization is involved in would not be able to know whether such operations are successful and profitable. X Close Editor Nov 10, 2009 Rating Submitted by: Ana Orwel Title Comment To answer this question we need to understand what is the most important role of accounting. The main objective of accounting is to capture, analyze, record and report data on the transactions which had an impact on the financial position of the organization during certain period of time. From this we can see that the result of the accounting process is provision of certain information in the certain form to the persons or entities using this information to make decisions related to the organization. There might be very wide range of persons and entities, using information provided by the process of accounting. 1. For example, business owners are interested in the profit the business earns and value of the shares in the business. Accounting gives them this information 2. Suppliers which supply goods to the business are interested whether the company will be able to pay for the goods they have supplied to it. Accounting gives this information to the suppliers. 3. Banks and other creditors are interested whether the organization will be able to repay loans and pay interest. Accounting again provides information on the ability of the organization to pay its debts on time. And so on, other users of accounting data can be customers, employees, tax authorities and other. Accounting plays vital role in any organization while recording and reporting financial data on the activities of the organization. Without accounting we as the parties interested in the results and success of operations the organization is involved in would not be able to know whether such operations are successful and profitable. Cancel Delete Delete & Ban Updating Comments page...

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