Importance of Accountancy in Business

 

  

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Accounting plays a crucial role in running a business because it helps in tracking the financial position of the business, the performance of the organization, income and expenditures, and also helps in providing management, government, investors, and other users with quantitative financial information which is used in making the business decisions.

Important Financial Statements generated by the Records-

1. The Profit & Loss Statement which is also know as the Income Statement.

2. The Balance Sheet which is responsible for providing a clear picture of the financial position of the business on a particular date.

3. The Cash Flow Statement which acts as a bridge between income statement and balance sheet and records the cash generated and spent during a specific period of time.

 Reasons to keep your Financial Records up to date-

1. Helps in evaluating the performance of the business.

Financial records helps to understand what is going on in your business in financial or monetary aspects. Records which are kept up to date helps you to track any possible debt, expenses, incomes, gross profit, net profit, and also helps you to compare and evaluate current performance of business with previous years performance.

2. Ensures Legal Compliance.

Proper accounting systems and maintaining proper accounting records helps in ensuring legal compliance when it comes to a successful business. Maintaining proper accounting systems and processes helps to ensure that liabilities such as income tax, sales tax, pension funds are addressed properly.

3. Helps in filing Financial Statements.

Accounting plays a crucial role in filing financial statements with different entities, wherever it is mandatory or necessary.

4. Helps to create future strategies and budget.

Historical financial data plays a crucial role in keeping the business operations profitable and the budget strategies and future strategies are based on it.

 

To conclude we can define accountancy as the language of business as it is the systematic knowledge of accounting, i.e., it gives an education about how the books of accounts are maintained.

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