Accounting is a significant process of maintaining the ledger in any business. These ledgers are recorded in the proper format so that every incoming and outgoing of cash amount can be easily traced at any point in time. Accounting ledgers are essential to track or study the consequences of every policy implementation in any business organization, particularly which are concerned with monetary aspects. It would be completely impossible to imagine any business without such record keeping of expenses and gains of any organization. The importance of accounting can be better recognized by evaluating its efficacy in any business.
Significance of Accounting
Accounting serves various purposes of any organization. It is the record keeping and easiness of monitoring features of accounting which makes this tool so precise and demanding with the business world that none of the organizations underestimate the significance of this process. Some of the foremost advantages of accounting procedure can be mentioned as:
1. Systematic Record Maintenance
For any human being, it is not possible to keep day-to-day transaction at their fingertips or in memories. Thus, proper recording, or to say writing them, is required. Accounting works on the different set of principles for different nature of such recording which depicts every minute to the major monetary transaction, its purpose, root, and designation. All these elements of transactions are recorded in a well-versed format which can be easily interpreted at the required point of time.
2. Determining Selling Price
As the entire flow of expense and gain of any organization is recorded in systematical order, it put company management at the better position from where they can easily identify the loopholes or pessimistic expenditure and cut them off from the main flow, so that more economical price range can be achieved.
Also read: Importance of good leadership skills
3. Ease of Evaluation
Any aspect of a company, whether it is profit & loss or asset and liabilities, can only be evaluated if the exact figures of expenses, gains or losses are available. Accounting makes this phase of organization feasible by recording each transaction systematically. On the grounds of these figures, various aspects associated with company affairs can be easily evaluated, such as the cost of equity, dividend proposed, profit & loss, liability, and assets etc. These figures are not merely useful for company purposes but also give a brief insight about the company’s present and future prospects to its investors and too concerned legal authorities as well, such as income tax and sales tax.
4. Transparency and Evidence to Court Of Law
The entire expenses and gains of any organization are recorded in a systematical order into the books of accounts, supported by relevant documents, which in turn provide transparency regarding every financial procedure of the company to its investors. On the other hand, it also provides legitimate proof of various transactions to the court of law, in case any of such are summoned to show up.
5. Supportive To Audits
The audit is a mandatory procedure through which every organization has to go. It is a process of certifying provided books of account, which can then published to investors and other interested people on their demand. This certification completely relies on the supportive documents of recorded transactions or legitimacy of the recorded figures. Once the audit of any organization receives certification of auditors, it has a clean impression in the business arena and market as well as investors, may show greater trust in any of such company.
6. Facilitates Management
One of the most significant aspects of accounting or bookkeeping is that it primarily facilitates management at various levels, in taking decisions and deciding policies for future operations. Any weird figure or any irrational financial transaction can be easily traced out amid of fair transactions and can rule out the future policies to avoid repetition of any of such transactions again.
These were only some of the prominent advantages of accounting, however, there are lots of other accounting features as well, which facilitates any organization in a much broader way than what is mentioned above. The importance of accounting is not possible to be mentioned in any single piece of writing as it is a wise subject but few of the foremost features can be highlighted to give a central idea of its significance. Some more key features of bookkeeping or accounting can be mentioned as:
• Helps in budget creation
• Assists in deciding future policies and investment decisions
• Curbing unnecessary expenses
• Business decisions
• Improved management
• Profit and loss statement
• Various costing factors, etc.
Hence, accounting has such a significance that it cannot to undermined in any business organization and also do not have any alternative as well.