Accounting is the language of business because it helps people, both internal and external, to understand what is happening inside of s business. Just as language is universal to people, so is accounting in business. Regardless of where in the world a business is located, financial information is interpreted in the same way.Know More
Experts use accounting information to assess how a business is doing. Financial documents, such as balance sheets, expense reports and audits, allow accountants to follow money and transactions. They use the data found in accounting documents to determine whether a business is financially solvent.
Investors use the information to determine whether they want to invest in a business. Accounting documents allow them to measure performance using ratios, such as inventory turnover, liquidity and stock performance. Without the knowledge of basic accounting principles, it is impossible to make smart decisions about investing.
Even governments use accounting to understand what businesses are doing with their money. Each year, corporations are responsible for paying taxes. The Internal Revenue Service (IRS) uses accounting methods to determine the right amount of taxes they must pay. If the IRS desires to find out more about a business and whether or not its accounting documents are accurate, they conduct an audit.Learn More
Accounting is known as the "language of business" because it communicates the financial state of a business clearly and concisely to those who understand accounting standards, according to New Charter University. With an understanding of accounting, stakeholders in a business can see anything from the overall financial status of the company to the smallest transactional details.Full Answer >
Accrual accounting occurs when a business counts transactions on the books regardless of when they are paid in full, according to Nolo. Transactions are counted when an order is made or goods are received when using the accrual method.Full Answer >
Accounting allows businesses to calculate their profit and perform analyses. Accounting is important for determining if a company's earnings reports are accurate, making it important for stockholders and regulators.Full Answer >
According to the Department of Public Expenditure and Reform, an accounting officer signs off on the annual accounts of a government body. An accounting officer is usually appointed by the top authority of the accounting officer’s government and then by the secondary legislation.Full Answer >