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 about Accounting
Accounting is the process of recording transactions that occur within a business, as well as creating reports for internal and external dissemination based on those transactions. Auditing, on the other hand, is the process of reviewing a business' activities, either as an overall entity or through specific departments.Full Answer >
Intercompany accounting is the process by which firms reconcile a company's transactions to eliminate duplication among different departments that may result in overstating assets, according to Oracle. Companies must adjust accounting practices for intercompany transactions or face legal consequences.Full Answer >
Throughput accounting is an offshoot of variable cost accounting that treats direct material costs as the only variable cost, while all other costs are assumed to be fixed, explains Richard J. Lukesh of Turnaround.org. The accounting approach was developed by Eliyahu Goldratt as part of the Theory of Constraints paradigm.Full Answer >
People need accounting because it keeps a record of cashflow, produces financial reports and monitors business expenses of an organization, according to the Houston Chronicle. Accounting helps owners make vital decisions to help their companies thrive.Full Answer >