Accounting is hard and boring, but there is a reason why accounting is always needed in businesses. This is because accounting is important for businesses to run well.
Key Points
- Accounting is the recording of financial information of a business; It is an act of verification.
- Accounting includes two (2) main functions: bookkeeping and auditing.
- Accounting is the collection of financial information; reporting Activities such as classification and accounting.
- When verifying, using systematic information obtained from accounting, documents for the business, You can make suggestions.
What is accounting?
Accounting is the recording of financial information of a business, it is the action of verifying.
Accounting will transform the financial situation of the business into an easy-to-understand context through raw financial data such as sales and expenses. Accounting can calculate the health and value of your business and provide better short-term, It will enable you to make long-term decisions.
Accounting = Accounting + Verification
In practice, there are (2) main parts in accounting.
- Bookkeeping
- Analysis
Bookkeeping
Accounting is the collection of financial information; documenting Activities such as classification and accounting.
- Collection – Identifying and storing records of financial transactions.
- Recording – Amount; date Proper recording of raw transaction records including descriptions.
- Categorization – Analyze each transaction into cash, to-do list; wages raw material, Fixed items, etc. are separated according to relevant categories.
- Accounting – Reviewing everything recorded above for accuracy; accounting; Doing backlisting.
(It should be noted that the first (2) steps, collection and recording, are also part of the business's overall record keeping.)
Accounting is the basis of accounting because it makes financial information accurate and systematic.
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Analysis
Once you have accurate information in one place, you can move on to the second part of accounting, which includes the steps below.
- Reporting – reporting the financial status of the business for internal use (eg management) and external parties (eg: investors, tax office).
- Verification – What areas of the business are performing well? Determining where changes are needed, etc.
- Clarification – recommendations based on verification; Making decisions.
For example - the 3 main financial statements made by accounting are the income statement; balance sheet Cash flow statement.