Generally, accounting is needed in business as corporate financial reporting. Making accounting reports can be used as material for company decision making according to the results of accounting analysis. With the existence of accounting, it will be easier for company to make decisions and other objectives. You can also use the best accountant services for your company at lokalerevisorer.dk.
From the notion of accounting, it alludes to the financial reporting system including the company’s profit and loss. Thus, accounting is needed in business because of some of the functions as follows:
Recording report or recording transactions systematically and chronologically is the main function of accounting. Record of this transaction is then sent to Account Ledger until finally preparing a final account to find out the profit and loss of the business at the end of the accounting period.
Protecting Property and Assets
The next accounting function is to calculate the amount of actual Depreciation of Assets using the appropriate method and applies to certain assets. All unauthorized dissipation of assets will result in a business going bankrupt. That is why the accounting system is designed to protect property and business assets from unauthorized use.
The next accounting function is to communicate the results and transactions recorded to all parties who are interested in a particular business. For example, investors, creditors, employees, government offices, researchers, and other agencies.
The accounting function is also related to system design and development. For example, a system for ensuring records and reporting of results always meets legal requirements. This system will be needed to activate ownership or authority to submit various statements, such as Sales-Tax Returns, Tax Returns, and so forth.
Furthermore, the accounting function that is no less important is the classification associated with the systematic analysis of all recorded data. With this classification, it will be easier to group types of transactions or entries. This classification activity is carried out on a book referred to as “Ledger”.
Make a Summary
This summarizing activity involves the presentation of confidential data with a delivery that can be understood and useful for internal and external end-users of the accounting report. This activity leads to the preparation of the report:
- Trial balance
- Income statement
Analysis and Interpreting
The last accounting function is to analyze and interpret financial data. Financial data that has been through the analysis process is then interpreted in a way that is easy to understand so that it can help in assessing the financial condition and profitability of business operations. Also, the results of the analysis are used for the preparation of the next plans and framing of policies for implementing the plans.