![]() Why Is Accounting Important?Īccounting plays a vital role in running a business because it helps you track income and expenditures, ensure statutory compliance, and provide investors, management, and government with quantitative financial information which can be used in making business decisions. There are three key financial statements generated by your records. The cash flow statement is a bridge between the income statement and balance sheet and reports the cash generated and spent during a specific period of time.The balance sheet gives you a clear picture on the financial position of your business on a particular date.The income statement provides you with information about the profit and loss. Here are just a few of the reasons why it is important for your business, big or small! It Helps in Evaluating the Performance of Business It is critical you keep your financial records clean and up to date if you want to keep your business afloat. Your financial records reflect the results of operations as well as the financial position of your small business or corporation. In other words, they help you understand what’s going on with your business financially. Not only will clean and up to date records help you keep track of expenses, gross margin, and possible debt, but it will help you compare your current data with the previous accounting records and allocate your budget appropriately. Laws and regulations vary from state to state, but proper accounting systems and processes will help you ensure statutory compliance when it comes to your business. ![]() The accounting function will ensure that liabilities such as sales tax, VAT, income tax, and pension funds, to name a few, are appropriately addressed.
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