Accounting Roles in the Company
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Accounting Roles in the company and
importance of accounting :
Accounting is an information and the measurement that system identifies, records and communicates information about an organization business activities. In business we used accounting in all the aspects. The most common contact through accounting is through credit approvals, checking accounts, and payrolls. In a layman term accounting is a language of business because all the organization set up an accounting information in order to communicate information to help people to take decision..
There are 2 kinds of decision makers: 1) External Users and Internal Users
External users: They are not directly involved in running the business. So, they will have a very limited access to an organization details. Still their business decisions depend on the information that is reliable, comparable and relevant. . External users include people like Lenders, Government shareholders, external auditors and regulators..
Example: External auditors use financial statements to verify that they are properly prepared according to GAAP.
2) Lenders would look into the information whether an organization will repay its loan and interest.
3) Customers use financial statement to check the power of the suppliers.
Economic and Business Reporting
Internal Users: They are directly involved in managing and operating an
organization they will help in improving the efficiency of the business. They
include managers, officers(employees), internal auditors, and sales staff . Example: Managers would look into the information about the project cost and revenues in order to makes changes in products and services.
Both Internal and external users rely on internal controls in order to control, monitor company activites.
The role of accounting
The role of accounting in business is to help interested parties (internal and external) to make business decisions.
LEARNING OBJECTIVE
Explain how the accounting process aids in the making of business decisions
KEY POINTS
Financial accounting generates some of the key documents, including profit and loss account showing the method of business traded for a specific period and the balance sheet which provides a statement showing mode of trade in business for a specific period. Without these financial documents it would be impossible to run the business or to make decisions regarding the business. The accounting process consists of measuring and summarizing business activities, interpreting financial information, and communicating the results to management and other decision makers. Management accounting also motivates managers and other employees towards achieving organizational goals. A well motivated staff performs better and is more productive. Organizations are able to achieve their goals if employees are well motivated.
TERM
financial accountingFinancial accounting is the field of accountancy concerned with the preparation of financial statements for decision makers, such as stockholders, suppliers, banks, employees, government agencies, owners, and other stakeholders.
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FULL TEXT
The role of accounting in business is to help interested parties, both internal and external, to make business decisions. The accounting process consists of measuring and summarizing business activities, interpreting financial information, and communicating the results to management and other decision makers. P&Ls show the financial details of a business over a specific period. Financial accounting also produces the balance sheet which provides a snapshot of a business's assets, debts, and equity at a specific moment in time.. Financial accounting also helps the managers in the business to manage more efficiently by providing them views of financial information which may include monthly management reports presenting costs and profits against budgets, sales, or other key metrics. Reporting can be customized for the specific needs of the business. Without these financial documents it would be very difficult to run the business or to make decisions regarding the business .
Business Decisions
Outside parties may decided to invest in a company based on its economic performance as shown on the financial statements, but there are other ways to use the financials statements to make business decisions. By carefully reviewing the financial statements companies can make best use of their assets. Companies can use the statement of cash flows to make sure they are collecting all the cash they are due. Companies can also choose to delay major purchases or the retirement of equipment based on the affect that transaction would have on the financials statements.
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