what is accounting essay

what is accounting essay

Importance of Accounting in Business

1. Introduction to Accounting

The means of communicating financial information of a business to its users. It is a subject that helps in maintaining accounts of various transactions. It helps in making decisions for betterment along with involving supervision of the financial components. A specialized area of accounting that takes into consideration the preparation of various reports which are useful for assessing the performance of the various divisions of the business. It is the subject which involves recording the financial transactions, which could be of the business or any individual. If it is a business organization, it helps in maintaining the record of the transactions related to liability, assets, income, and expense, which would give the exact information about the true position of the business on the closure of its accounting period.

Accounting is an important activity by means of which a record of monetary transactions is maintained. Organizations that need to maintain their clients’ and their own transactions often use accounting discussions. The main branches of accounting are financial and cost accounting; the main difference being that the purpose of financial accounting is to present financial information to its customers, while cost accounting is leading managerial decisions. It is a subject that students take up while pursuing higher education. Often they are under a lot of pressure because they are burdened with a lot of coursework. This is when professional websites can help them.

2. Principles of Accounting

– For accounting purposes, there is an identity apart from the owners of the proximate entity. – Remember the concept of poor savings, private owner assets, and business assets. – According to this concept, assets funds are credited from the owner, other enterprises, or authorities. – These also are distinct from each other and should be recorded separately.

2. The Business Entity Concept – Business enterprise is an economic unit which can be shared and meaningfully contrasted from each other. Financial resources composing the economic unit are separate and distinct from other entities.

– In other words, income earned in the month is shown whether received or not. – Expenses are shown as they are incurred. – Prepaid expenses are those paid or incurred but not used during an accounting period. – Capital assets are those assets expected to last for more than one accounting period. Examples are buildings, machinery, furniture, and fixtures.

1. Accrual Basis of Accounting – Revenues are recorded in the period in which they are earned or recognized, and expenses in the period in which the same uses are doing them.

There are a number of accounting principles, definitions, and concepts that underlie the practice of accounting. This section is designed to give the user a very brief summary of some of those principles.

3. Role of Accounting in Decision Making

Therefore, an understanding of basic accounting concepts would assist in guiding the management while taking their decisions. Besides, the results of the application of accounting information, such as the production of various financial statements, measure the impact of the decisions taken in the past. At the same time, they are, in turn, as important as they provide information that would be necessary for future decision-making, by measuring the financial implications of several alternatives. Accounting provides the essential information to the management of the business for planning and evaluating the success of different company operations.

Accounting provides the management of business with vital information that is needed to make prudent financial decisions. No step can be taken without reference to relevant accounting information. Every business firm is set up to earn profits. The management of a business, therefore, faces the need to take decisions affecting the business activities. Further, decisions require information. Such information about the business must enable those who are charged with the responsibility of making them to measure the results of past decisions, the cost and cost-effectiveness of future alternatives, and whether the goals of the business organization.

4. Financial Reporting and Analysis

Some people believe that the financial report money is a direct measurement like to equity. That financial feature applies the responsibility to provide information about changes to their resources, be eligible for resources and mission of resources in providing to stockholders and other potential stockholders. A current firm is expected to establish the role of accounting and economic information in the estimate of the trade-off with the social problem and the timing of Medicare, tax, and political support for financial statement realism, timely and accurate assets of earnings information. Optimal trading sometimes helps to cut across the trade-off by optimally specifying earnings announcement date. A current shareholder aperture announcement provides information on the accused shares even more likely to perceived cash in their portfolios to price berth tax policy.

Financial reporting is the method to communicate economic information regarding an entity. It is very critical for business; accounting applies the norms and methods to evaluate and extract financial reports. It is very helpful to users because it supports decisional earnings that need to be created on the basis of accurate and timely reports. It also supports one to anticipate future circumstances that these will arise. Firms, traders, and other stockholders use financial reports to support spot trading, supply chain, and other investment transactions that they aspire. Financial reports like balance sheet financial statement, profit or loss account, accounting statement, and advancements provide a led to traders to find firms’ liquidity. Financial reporting also supports them to make a critical evaluation of the firm’s financial place and its prospective about making future profits.

5. Ethical Considerations in Accounting

Conscience can affect a person’s values and influence their respect for laws, standards, and ethics concerning accounting practices. An accountant’s behavior will always be influenced in multiple ways by their personality, level of moral development, mode of ethical evaluation, and ethical ideology. Ethical judgment, ethical sensitivity, ethical motivation, and moral opportunity can affect the person’s ethical behavior. People who have high internal ethical values believe it is moral to be trustworthy and provide integrity-based services. Those who view ethical sensitivity may practice ethically when they are identifying and recognizing ethical situations when they arise. Moreover, when ethical motivation is at a high level, people will take calculated actions to address a situation and practice ethical behavior. The last component, moral capability, allows a person to apply judgment when faced with a dilemma and make the correct decision in order to act in an ethical way.

Accountants must adhere to a set of moral principles that revolve around honesty, confidentiality, integrity, and objectivity, putting both their company’s and clients’ best interests first. One of the cornerstones of an ethical accountant is their ability to maintain a standard of professionalism with their clients. Acts such as holding confidential data secret, using integrity when presenting financial information, and not allowing outside influence to motivate inaccuracy in the records are examples of professional behavior. An ethical accountant will be transparent with their clients when presenting records. Also, an accountant is not allowed to represent conflicting interests, compete with their clients, or take advantage of certain opportunities without obtaining their clients’ consent.