importance of accounts

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NEED andIMPORTANCE

OF

ACCOUNTING

Presented by:TARUN SHARMAVINAY KAMAL

SUDHANSHU SETHI

VIREN DUTTA


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ACCOUNTING

THE LANGUAGE OF BUSINESS

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Accounting is the information system that...

measures business activities,

processes data into reports, and

communicates results to decision makers.


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- a process of identifying,

recording, summarizing,interpreting, analysing and

reporting the economic

information to decision makersin the form of financial

statements.3

Accounting


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NEED OF ACCOUNTING

At the end of each year, all the businessmanwant to know how much they have gained or

lost during the year; how much capital is

invested at the end of year; how much amount

they are liable to pay and to whom they owe

it; how much is owe to them and buy whom

etc. In order to attain such informations , it is

essential to keep a complete and systematicrecord of each and every transaction entered

into during the year.

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By keeping a complete and systematic record of every

business dealings, the businessman can know how much is

the amount of purchases , how much is the amount of sales,what are his total expenses and what is the amount of profit

earned or loss incurred during the year. Furthermore, he can

ascertain the financial position of his business such as how

much capital is at the end of year and how much is invested

in various assets. Besides the properly maintained accounts

are helpful in the assessment of income tax and sales tax and

are accepted as proof in court of law whenever needed.


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WHY IS ACCOUNTING IMPORTANT?

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From a laymans view, accountancy is keeping records of

transactions. Thus, most basic and simple motive of such an

activity is to keep a record for further use, This recorded data

helps the person to determine the earning and expenditures that

have taken place .In addition to that, such records are alsoproofs that such transaction has taken place . The last basic

intention is to determine fields that the income can be

increased and expenditure can be decreased.


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IMPORTANCE OF ACCOUNTING

Importance of accounting has beenchanging with the changes in businessenvironment and increasing socialdemand over the centuries , The

importance of accounting remainedconfined to record keeping of financialtransactions only. But, today rapidly

changing business environment haschanged the importance of accountingand at present the accounting havefollowing importance in different spheres

:


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Historical records

Information systems design

Service provider

Helps in determining net profit


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Reputation and credit building

Prevention of fraud

Enables comparative study

Aid in decision making


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Historical records: accounting is viewed as chronological

records of or financial transactions in books of accounts accordingto specified rules

Information system design: accounting is regarded asinformation system because it is capable of providing the kind of

information which managers, investors or creditors require for

taking appropriate decisions. In words of the movie Jerry Maguire,

is all about showing the money.

Service provider: Accounting is regarded as a service activitybecause it provides quantitative financial information that is helpful

to user in different ways.

Helps in determining net profit: it is also regarded as ameans of determining the true profit and loss of business enterprise.


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Reputation and credit building: The reputation in business creditScores can be improved by simple act of establishing and operation a

sound in accounting information system in an organization. the belief is

that any company that has the got an efficient accounting system issuccessful in all aspects of business.

Prevention of fraud: Fraud can only be prevented in anenvironment when there is good internal control in place. Thus

accounting is only way of keeping track of all these an efficient andeffective manner.

Enables comparative study: By keeping a systematic recordaccounting Help the owners to compare one years costs, expenses,

sales and profit etc. with those of other years such a comparisonprovide the useful information. On the basis of which important

decision can be taken more judiciously.


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ACCOUNTING AS AN AID TO

DECISION MAKING

Accounting helps in decision making by

showing where and when money has been

spent, by evaluating performance, and by

showing the implications of choosing one planinstead of another.

Fundamental relationships in the decision-

making process:

Event

Accountants

analysis and

recording

Financial

statementsUsers


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importance of accounts

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