Accounting is a process of collecting and analysing financial information and making it available to internal stakeholders as well as external regulators. This ensures a more stable and thriving financial structure. It also allows companies to remain compliant with various legal and tax regulations. Accounting aims to bring transparency in the system through providing an in-depth look at assets, liabilities, share of equity, revenue, profit and loss.
What are the 7 Functions of Accounting?
One of the primary functions of accounting is recording business transactions in a systematic manner and ensuring that all expenses and incomes balance out over time. This is known as bookkeeping and is an essential part of any organization’s financial structure tax preparation services. This is usually reflected in the trial balance, which is a ledger statement that shows how much an entity has at a particular point in time.
Another significant function of accounting is preparing reports based on these recorded transactions. These can include the income statement, the balance sheet and cash flow statements amongst others. Accountants prepare these reports on a regular basis to give various stakeholders, like employees, suppliers, investors, analysts and governments, a clear conception of the financial health of an organisation.
Additionally, accounting involves preparing budgets for the company and its departments. By reviewing the current financial status of the organisation, accounting helps formulate and implement comprehensive financial policies and strategies to advance the company’s business goals. It also identifies areas of risk and takes steps for reducing them.