Importance of Accounting

Accounting is very essential in our daily life. It is practically involved in our day-to-day living, whether we know it or not. Everything and everyone needs accounting.

But before anything else, let us first define accounting. Accounting is said to be the language of business. It is the process of recording, classifying and summarizing the transactions of the business in chronological manner in terms of events, transactions and money which have significant importance and analyzing the results thereof. It has a vital role when it comes to decision making. Accounting is generally considered as the process of keeping track of a certain business’ finances by recording its accounts payable, accounts receivable and other financial transactions.

Now that we know what’s accounting, let us proceed to the importance of it in various fields and individuals.

Business. Accounting is the backbone of a business. It allows a company to know its performance, whether they’ve been doing well in their business. Having an accurate track of cash flows will help them determine if they are gaining profit or not. Accounting statements help the company know their economic stability. Thus, accounting is important when it comes to decision making of a certain company.

Government. Accounting helps in the funding, budgeting and planning of the government. This will also determine how much would the government allocate for the different sector like education, industry, agriculture, infrastructure, etc. Accounting also plays a vital role when it comes to tax collection and implementation.

Employees. Employees should have basic knowledge in accounting. This will help them determine whether their salary is equivalent to the work that they are giving to the company.  Moreover, an employee should be able to assess if the company that he/she is working has the ability to provide them employment opportunities and benefits. With this, an employee will know if he/she will stay in a certain company. Also, this will help them know if their salary is enough to cover all their expenses.

Consumers. Every time you purchase an item, accounting is involved. Consumers should know if the item that they are about to buy have a reasonable price or not. With this, they can determine if a product is worth the money.

Households. Accounting is really useful to all households. This is a great help in planning and decision making. In addition, this will help them in creating budget at home. With that, they will know how much will they spend on children’s education, health, household expenditures, etc. but still have a little saving for emergency purposes. Through this, they will know how to spend money more efficiently.

Students. Student use accounting in budgeting their allowance. Also, this will help them weigh their needs and wants. With this, they will have a clear idea on how to spend their allowance wisely.

Accounting is definitely part of our life, whether you are a businessman, an employee, a student, a buyer, a government official or an ordinary person. It is a very powerful tool when it comes to decision making. Accounting is really useful in every sphere of our lives.

 

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