Role of Accounting in Business Activities
Accounting or accounting has been studied in earnest by most business people and accountants themselves are considered important in achieving the sustainability of a business. Accounting in a company is likened to the heart in the human body that regulates blood circulation in your body, so companies always accept professional accounting positions not from other majors because it is important.
But there are still entrepreneurs who are very familiar with accounting so that it can have a fatal impact. The fatal impact is that entrepreneurs do not know the financial statements so they depend heavily on the opinion of the accountant, if the accountant is good then it is good advice, but if the accountant is not good it can result in errors in deciding your business plan.
Entrepreneurs do not have to understand accounting as a whole, it is enough to learn simple accounting, namely understanding the company’s financial statements.
Based on the above understanding, of course the role of accounting for companies is not in doubt. Accounting for companies plays an important role because it helps in the process of running the business. Then what are the main accounting roles for companies that are often found in business life. Here’s the explanation.
The first role of accounting for a company is as a source of financial information for the company. The sections in accounting such as bookkeeping and financial reports provide a variety of information about various kinds of financial transactions that occur within the company. Various data related to finance will be recorded in a detailed and routine ledger. The ledger will later be forwarded and produce financial reports. Therefore, you should arrange your books neatly and regularly update data. Of course this will be much more effective and efficient if you use accounting software that will record all of your company’s financial reports. One of the best accounting software with automatic data recording and processing is a Journal.
After being collected, the accounting data is processed and will be used as a company performance analysis knife. Accounting data reflects the performance and financial position of a company. so that it can help you to understand what happened to the company and compare current data with previous data. If there are substantial variations in performance, the employer can implement changes within the company to correct for these differences. The more frequently accounting data is presented, the easier it will be in the review and analysis which opens the opportunity for management to recognize small problems before they become big problems.
This role will be closely related to company budgeting. Because one of the most common uses of accounting information is to create budgets and estimates for business planning. By using data from the previous period, the company will make a budget and plans that should be done for the coming period. This data is used ranging from sales and profit projections, evaluation, making budget proposals, subsequent business planning, negotiations, to reviews and approvals.
Liaison with Third Parties
Apart from dealing with internal affairs, accounting also exists to help companies to connect with outside parties. Accountants and the accounting data they process serve as a bridge between the company and third parties to make decisions regarding cooperation, buying and selling processes, investments and other transactions. Accounting data provides information to vendors or investors to facilitate decision making regarding your company. Of course this makes perfect sense because investors will not invest without the existence of up-to-date and accurate financial information. Do not stop there, accounting and the elements in it can act as a liaison between companies and the government in terms of tax reporting and the audit process.
Investment Decision Making
If the previous point discusses more about third parties investing in the company, then at this point the role of accounting serves to give the company consideration when making outward investments. Companies usually use accounting data to determine how to invest funds. From the results of the company’s financial analysis, it will be seen how much cash is needed in the short and long term. Once this has been determined, it will then be selected which stocks, bonds or investments are suitable for storing the cash for the required period of time.
So the role of accounting in business and business activities is very necessary because good financial management will provide input to the company, making it easier to make decisions about stakeholders in your company.