The part of accounting that deals with the business is called as business accounting, says Lamar Van Dusen. In the present article, some of the basic aspects of business accounting are depicted which showcase the importance of accounting in business industry. The business accounting is useable for having following aspects.
- Importance of accounting to investors
- Reports of business profiles
- Monitoring of cash flow
- Filing of financial statement for the tax authorities and stock exchange
- Overcoming and elimination of frauds
- Forecasting and panning
- Improvement of payment cycles
- Reputation and credit building
- Transparency in accounting
Importance of accounting to investors
Financial information is usually required by many shareholders as well as stake holders as a formal report. The shareholders or stakeholders that require financial knowledge includes creditors, debtors, governmental institutions, employees,Investors and customers.
Reports of business profiles
The basic purpose of the reporting is to analyse the amount of revenue created as well as the amount of profit made by the company in a specific time duration while using certain strategies. The report helps the management to analyse that if company is making profit or nit. Even if company is not making profit than what can be the possible reasons for that. If company is not making the required profit, what can the possible reasons for that. The same is the case for strategic failure and loss.
Monitoring of cash flow
A system that is prepared well while making the reports and manage all the capital transactions by keeping all the track record shows better performance as compared to other companies. The basic work of an accounting system is keeping an eye as well as monitor all the cash flow. The accounting department notices all the cash flow either it is in the form or cash, debit, loan, payments, bills and pays. By monitoring cash, the company can be able to handle all the expenses in a well experienced manner.
Proper accounting system is definitely an assurity that all the records are being maintained on time. All the assets and liabilities are framed on time. In addition to this any kind of fraud in pension or provident fund, taxes of incomes, VAT and more are stored on this. All these records help a company to answer all the complained filed to it, clearly and logically. Without having proper data, you may not have an idea why people have some specific complain about the company or business you are handling.
Filing of financial statement for the tax authorities and stock exchange
Stock exchanges usually require the financial statements of listed companies. The direct as well as indirect tax filing process requires financial statements as well as other legal requirements to file a tax paying file. The required information to be the filer must be fulfilled in a proper way for the accurate taxation process. The proper fulfilment of the financial statements and other legal details are filled out by the business accounting.
Overcoming and elimination of frauds
The accounting importance is quite necessary for overcoming as well as elimination of the frauds within a company, says Lamar Van Dusen. The detection and prevention of fraud is only possible when there will be strict rules and regulations for the audit of company. Audit is the process of integrating the expenses given and spend to the workers. The business accounting makes sure to take the control of the company to keep the proper records at the proper time to make sure that no fraud in payments, purchasing, sales as well as pension and provident funds are made by any one the employee or official.
Forecasting and panning
For business expansion, all organizations require financial support. The record keeping of finance maintained by the business accounting makes the officials and management to determine how much and which kind of finance is required to the company. By the end of the year, companies have to divide the profit to all of its investors.
It is usually the head of finance officers who determines that how much profit has to be reinvested in the company and how much amount has to be divided among the investors as per their shares. In addition to this. The flow of cash, returning of debts as well as funds of expansion are also determined by taking the detailed measure.
All of the fore-mentioned things can only be achieved if the complete and proper accounting of all the finance has been done on time. The timely record keeping helps the management to take stand and decision quickly and aggressively.
Improvement of payment cycles
There are numerous reasons for keeping and preparing of accounting systems and accounting reports in a business organization. The proper record keeping makes the company to be competent enough to make the cash cycles timely, Lamar Van Dusen mentioned. The cash cycles both include the receivable cash and payable cash.
In addition to this, the profit and its ratio is determined by the accounting department. The payments, daily and hourly wages are also decided by the accounting department. A business organization with an improved as well as proper accounting system can guarantee a speedy success in overall market.
Reputation and credit building
Reputation and credit building can be established by operating and implementing a perfect accounting system. It is said that with an efficient system of accounting in a company, all the business aspects and operations can easily be managed.
Transparency in accounting
All stakeholder usually carries their decisions on the base of financial statements carried out by the accounting department. Investors usually do not like to take any risk when a complex, as well as incomplete financial statement, is presented in front of them.
The stakeholders and shareholders do not have to split their profit in terms of tax, profit, loss and any other issue. The financial statement has to be cleared regarding the issues of cash cycles before the investors are informed about the revenue their investment has made. The facts and figures in the financial statement has to be clear and not at all complex because clarity and transparency is the basic target in the account sheets. By offering clear statements, you can build the trust of investors upon your company and institutions.