An accounting system actually has several purposes in any company. Although one might think the only real importance to an accounting system was to keep track of income and expenses, there are actually other factors that require a solid accounting system. Those in charge of the company rely on data from the accounting system in many ways throughout the course of normal business.
The main and most well known reason for an accounting system is so that the company has a record of all revenue and expenses for the company. This information is used in typical ways such as providing reports to investors and creditors. Anyone that is doing business with the company will want to know the financial state that it is in. Shareholders will also be interested in knowing the bottom line after all of the expenses have been paid.
With this system in place it becomes easier to make bigger decisions in the company. Hiring and firing, purchases, sales, investments, mergers and more can all be affected by the financial state of the company at the time. The data that is produced by the accounting system will let the right people know what major decisions need to be made and which ones need to be avoided.
A viable accounting system is also an excellent way for a business to keep track of employees and monitor their habits to ensure they are on track with the goals of the company. It is a system of checks and balances.
The purpose of the accounting system is to keep the track of transactions and recording revenue and expenses of the company. It helps in recording, analyzing and retrieving the financial data. On the basis of financial status and financial reports important decisions of the company are made. The basic purpose of accounting system is the identification of all the activities which may impact the companies financially. These activities include purchases, sales, investments made and loan lending etc. Moreover, accounting system also provides a proper way to the companies for the monitoring and handling financial data like all data is arranged in journal entries and ledger. This also increases the internal check on the organizations.
3 important activities in accounting process?