Accounting’s Importance to Business
So why do we need accounting? Asking that question of an accountant is like asking a farmer why we need rain. We need accounting because it’s the only way for business to grow and flourish.
Accounting is the backbone of the business financial world. After all, accounting was created in response to the development of trade and commerce during the medieval times.
Italy is our first recorded source for accounting entries, and the first published accounting work in 1494 was by a Venetian monk. So you see accounting as an organized method for record-keeping has been around almost as long as the trade and business industries.
Another interesting fact is the knowledge and principles upon which the first accounting practices were established, have changed very little in the many hundreds of years that accounting has been in use. The concepts of assets, liabilities, and income and the need to reconcile these areas is still the basis for all accounting functions today.
The process for recording those transactions, and the many reports generated by the compilation of that information has evolved over the last two hundred years. Thanks to the creation of computers, many of the bookkeeping functions that are vital to accounting, but somewhat repetitive are performed by data entry clerks, and the reports generated come from the IS Department.
The end result is still the same: accounting gives us the financial snapshot we need in order to make solid business decisions about the current status or projected future health of our bussiness .
A service is an intangible element which is not visible and cannot be held but only experienced.
There are two basic categories of accounting: financial accounting and managerial accounting. Financial accounting is comprised of information that companies make available to the general public: stockholders, creditors, customers, suppliers, and regulatory commissions.
Accounting is the conscious of the bussiness word. When handled with care and with respect, it performs as expected. When abuse occurs, and the system is circumvented or overridden because of dishonesty and greed, it doesn’t work correctly. accounting is much like all other systems in place, they are only as good as the people using them.