What Is The Role Of Accounting In An Organisation?

The practice of accounting has many roles in a modern business today. They allow a business to accurately determine the profit or loss from doing business for a given amount of time. This allows a business to accurately determine what state and federal income taxes are due annually. Accounting is information that is used by potential investors to decide whether or not to buy stocks and bonds in the firm.

Today accounting practices are standard to ensure compliance to all state and federal laws and to avoid fraud. The principles today are referred to as Generally Accepted Accounting Principles (GAAP).

Some of the basic accounting principles as taught today include the balance sheet equation of assets =  liabilities + stockholder's equity. The source of information for the balance sheet is the income statement which has the formula revenues - expenses = net income or net loss. The next step in preparing financial statements is the statement of retained earnings. The formula for this is retained earnings from previous statements + net income - dividends = ending retained earnings.

Once these financial accounting reports have been done, state and federal taxes can be determined along with a number of other important ratios used by investors. The current ratio is determined by dividing current assets by current liabilities. The debt to total assets ratio is determined by dividing total assets by total liabilities.

All of these reports play a vital role in today's businesses whether they be multi-billion dollar corporations or a mom and pop corner store in a small town. Not only do they provide valuable information to potential investors, they give the owners of the business a snap-shot of the financial health of their business at any point in time the reports are generated. With today's accounting software, what was once a tedious task that could take days can now be done in a fraction of the time.

The role of accounting in business organization?

Accounting tract the assets, liabilities, owners equity, revenue and expenses of an organization. It provides not only current operating information for management but also track the historical transactions of the entity. It encompases not only cash earned by the organization but also the investment activities, financing activities, lending activities, non-cash charges and recognition of and expiation of the useful life of assets used in the operating of the entity. It also encompasses intangible recording and recognition of items that may have a value yet are not specific in nature such as organizational cost, patents, copyrights and trademarks. I will reflect monies owed, accruals of interest on those monies and also the amounts of excess over operating expenditures that have not been distributed. It is the basis of calculating taxes owed and due as well as a parameter as to the health of the entity and is essential for owners and managers in calculating and projecting operational problems, budgets and compensation. With out accounting no entity could survive. It is the essential information needed to not only run but also perpetuate a continued enterprise.

Accounting is one of the most important functions of business.  It is basically a systemic procedure that deals with the record, verification and reporting of the financial dealing of a company. This includes the assets, liabilities, income and expenses etc.

This function is very essential for an organization. This is  because through this function an organization can keep a record of all its dealings regarding money. It has answers to where money was spent or from where is the money coming in.  It provides all the essential information to the managers and the employees, which helps them in making business decisions. It also helps the lenders, investors etc in making their business decisions.

To easily understand, let imagine accounting as blood in your body or fuel of your car (hope you have one of your own). Though all parts of your body or car are good, without blood, you die, without fuel, your car doesn't work. So, that explain how important accounting is. It plays the vital role in a business organisation.

Accounting plays a important role in decision making process in an organisation.An accounting system provides information in a form that can be used to make knowledgeable financial decisions.The information supplied by accounting in the form of quantitative data,primarily financial and relates to specific economic entities.Accounting provides the means for tracking activities and measuring results.

Accounting is the art of recording,classifying and summarizing and it is a important part in any organisation. The transaction that are ocuuring in day to day business is need to record,and it is the task of the accountant and the accountant provide the information, that help to know that whether the organisation is in profit or loss and how to improve the business performance and it include the journal, ledger, trial balance and profit&looss account.

Establishing an accountability for the assets and transactions under individual control
keeping the track  of the business activities
obtain a detail information about a transaction
evaluating the efficiency of department of an organization
maintaning an evidence of the company business activity

Accounting plays great vital role in the field of business organization. None of the organization can recognize its revenues & expanses without it & none of organization is able to come to know where its organization stand's financially, without accounting system. Accounting helps to keep numerical record of organization & also help to keep check & balance in the financial records of firms. It helps to measure profit & loss of origination. Though we can say without accounting a success in business is impossible.

Accounting can never be left out in a business organisation because accounting is the life blood of an organisation and without it an organisation cannot stand firm with competing businesses.