Last updated on March 6th, 2021 at 06:37 am
A lot of transactions take place daily in all kinds of businesses. Therefore, it is really important to keep a tab on all of these exchanges and transactions. This makes recording and keeping a track of transactions important. Accounting helps in keeping a tap on all of these transactions.
What is Accounting?
Accounting is a comprehensive process of recording transactions that goes on in a business. Accounting is done by all kinds of businesses: be it a large company or a person running a small store in his colony. It is primarily concerned with keeping a record of all the transactions but it serves various other purposes too.
It includes analyzing, summarising, and classifying the information recorded in the form of different types of transactions. Accounting process can be done both online and offline. Keeping a tract of transactions by maintain a register and writing things down is a conventional way of doing things. A lot of companies have now switched to an online system of accounting which is much more convenient and easier to use. A lot of software like Tally, Oracle, SAP, etc. are now dominating the market and have made accounting process a cakewalk. To become an accounting professional, you can take up an accounting course which will give you a better understanding of how things work.
An accountant has to prepare different financial statements. These financial statements form the basis of a lot of major and minor business decisions. These financial statements include income and expense statements, cash flow statements, Profit and Loss account, balance sheet etc. Documents like balance sheet are very important as they give you a picture of your financial standing at the end of the year specifying the value of assets you hold and the liabilities you owe. You can enrol in an accounting course to understand all of this in a better way.
What are the functions of accounting?
Accounting plays a major role in all kinds of businesses. It has different functions:
- Accounting serves as a basis of financial planning: All the statements prepared by an accountant give you an understanding of your financial position. You also get to know about the profits earned and losses incurred from these statements. Therefore, with the help of this information, you take different business decisions. In the case of profits, you formulate ways to utilise it and reinvest in your business. In case of a loss, you find ways to get back on track
- Prepare budgets: Accounting acts as a base for budget formulation. Budgets are made in line with the accounting statements. These statements give an overview of the sources of income and the areas of expenses. These can be helpful while you are planning or preparing a budget for your company.
- Controlling cost: With the regular recording of transactions, you can keep your costs in check. You can avoid wasteful expenditures and spend money wisely keeping these statements in your mind.
- Prevents errors and frauds: A lot of things might not come in your radar or slip off your mind in case you are not recording all the transactions. Therefore, accounting is important. With accounting, you can eliminate the errors which can be caused due to negligence or forgetting of transactions. Also, if you keep a record of all the transactions, you can easily detect any fraud which is going around in the business.
Accounting serves a lot of other purposes like evaluating the performance of the company, providing data of past performances for performance evaluation, etc. With an accounting course, you will be in a position to understand all of this better. You can build up the required skills and become a successful accountant.
