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Accounting Guidance


Purpose of Accounting:

Accounting can be called as the systematic recording of a financial transaction of a business. Accounting helps to recognize the financial position of any business. With all accounting activities, the final report provided helps management to know the business position so they can be able to know which direction they are ending. It is very important to know the financial position of our business.


1. A Businessman should be able to read Financial Statements i.e. Balancesheet, P&L Account of his Business. It helps businessman to know the strength of his business.

2. To know the Cash flow of our own company.

 

Area of Working:

Keeping records for

1. Accounting

2. Audit

3. Taxation

 

Cash Flow :

It is the incoming & outgoing cash

Types of Cash Flow:

1. Cash flow from operating activities.

opearating activities of a business like purchase & sale.

2. Cash flow from investing activities.


Importance of Accounting


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  • Planning Budget : Budgeting is a core factor in every business. Planning budgets help business to make strategies, save money and noticing any expenditure exceeding the budgeted amount. To make a budget you need various previous records. In order for these documents to be available, they must be very well maintained through accounting since they are the basis of planning and making budgets.

  • Keeping Records : Every business needs to keep records and act upon them in order to run smoothly. In this case, accounting plays a big role in keeping records. All records are collected, organized, and interpreted in order to be communicated to the end users, therefore helping in making an economically viable decision which will lead to the positive productivity of the business organization.

  • Decision Making : Any economic or any decision regarding the business organization is made depending on the financial statement of the organization. A financial statement is as a result of accounting. Without proper accounting in a business organization, the executives can't make a sounding decision since they will be operating in blindness hence making it impossible to achieve organization objectives.

  • Information to Investors : Financial statements and accounts are used to represent the organization to the stakeholders such as debtors, creditors, government, and investors, customers and employees. Many investors will run away from your organization if you lack financial records and accounts to presents so as they can know the business progress.

  • Reporting Profits : The key objective of any business is to make profits. Every business, being a small or large organization, must maintain accounting system so as they can ascertain what they are making on their business transactions. This also enables interested parties to make the decision on the progress of the business productivity.

  • Managing and Monitoring Cash Flow : Proper accounting systems will take care of working capital and any other cash requirements within the business organization.

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