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.Know More
A company needs to earn a profit to thrive, and basic accounting is important for determining whether its revenue is greater than its expenses. While basic accounting is fairly simple, finding all areas where a company is spending and earning money is potentially challenging.
Investments tend to make the process more complicated. Companies need to invest to grow, but the cost of an investment changes over time. In addition, companies have the ability to change how they deal with investments in order to pay less in taxes. Accountants are able to analyze this data and determine better ways of reporting revenue, spending and investment.
Noticing changes over time is also difficult, and companies rely on accurate accounting to determine if their tactics are working well. Tracking changes in customer interest after an advertising campaign, for example, requires tracking sales before and after the campaign has begun. Accountants are able to collect this information and factor out other variables that can cause changes. Most accountants now use computer tools to help them deliver more informative analytical reports.Learn more in Accounting
Accounting is important because it provides an objective picture of a business' financial success. In addition, accurate bookkeeping and accounting is extremely vital for tax and legal purposes. Many companies are required to have particular accounting procedures in order to comply with legal code.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 >
The profit equation is used to determine a company's profitability and can be described in its simplest form as Profit = Sales minus Costs. "Costs" refers to a figure that reflects both fixed and variable costs combined. The figure for "sales" is derived by multiplying the number of units sold by their unit cost.Full Answer >