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What is accounting?
It refers to managing reporting related to finances, assets, stocks and time. It is also defined as the production of financial information. We can also call it a part of the business. It tells you whether you are making a profit or loss, what is your cash flow, what is the current value of your company assets.
Why Accounting is important?
Accounting is important because it keeps track of the company’s financial status. Either a company getting enough profit to maintain its company’s operations or not.
You cannot run a business without proper accounting. How you are going to keep track of your finances?
Every business owner needs to track their finances. Without proper accounting, it’s not possible to know whether business making a profit or not. Accounting plays an important role in measuring the worth of the company.
- Managerial accounting
- Financial accounting
- Cost accounting
- Tax accounting
Financial accounting: The information produced here is for external use in the form of a financial statement. It is the process for preparing financial statements used by the company to show their financial performance to the people outside the company like Lenders, government agencies, investors and auditors. Every year the company generates its financial statements.
It is similar to financial accounting. It is also known as the management accounting. It’s mainly for the internal operations of the company. Management uses this concept to make important decisions and planning and controlling business operations.
Tax accounting: Tax accounting includes all the matters related to tax. It tells what tax they must pay and why. Tax accounting involves the calculation of various taxes like income tax, service tax, etc and their timely payment.
Cost Accounting: With the help of cost accounting we can record, examine and study the company cost spend on any goods or services in the organization. It helps the organization in cost controlling and making strategic planning on improving cost efficiency. Management gets the idea where they have to control the cost and where they have to increase more.
Why accounting matters for your business
- Accounting is important in getting investors or selling business.
- Accounting is important in securing loans.
- Accounting help you get paid.
- Accounting helps you plan for growth.
- Accounting help you pay the right amount of taxes.
Users of accounting
- Business owners
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