What is Accounting?
Accounting is systematically recording, summarising, analysing, and reporting financial transactions related to a business. It provides essential financial insights by generating reports such as financial statements that summarise:
- Operations
- Financial Position
- Cash Flows
Key Features of Accounting
- Scope: It applies to all businesses, from small businesses run by a bookkeeper to the world's largest and most highly developed corporations with dedicated finance departments.
- Purpose: It assists management in making decisions based on structured and unambiguous information from investors, regulators, and taxation authorities.
Advantages of Accounting
- Financial Tracking: Allows income and expenditures to be tracked.
- Compliance: Assures legal and tax compliance.
- Decision-Making: Provides the data for factual and quantitative analysis of business strategies.
- Investor Confidence: Provides transparency to stakeholders, which yields trust.
- Performance Analysis: Helps analyse operational performance and profitability.
Conclusion
Accounting plays an inevitable and indispensable role in the operation of business activities. It gives businesses an accurate and elaborate approach to maintaining financial clarity, complying with rules, and sustaining information for better decision-making. The scale of an enterprise determines the gravity of the essence of accounting in a given enterprise, which becomes decisive when the business becomes big, large, or complicated.
