Saturday, April 23, 2011

How is accounting used in business?

Accounting is the art of maintaining the financial records. If an accountant chooses to record certain transactions at different times, for instance, sales in one month and expenses in another, the financial records will be different or in some cases incorrect. Investors may choose to purchase stock in a company based upon the incorrect information provided by the accountants. This is basically what happens when an investor is defrauded or there is accounting fraud.
In order to prevent accounting fraud and inconsistencies in accounting practices from one company to the next, accountants have created policies and procedures that should be used by all accountants. By following these policies and procedures an accountant guarantees that the records of one company can be compared to another company in a systematic and logical function. This allows investors to make informed decisions on what companies are making a profit and how they should invest their money.
If you are starting your own business, chances are many people have instructed you to get an accountant. For many people this may seem like expense that is not necessary for their one-man company but an accountant can assist in creating a simple method of tracking your income and expenses to allow you to determine if your new business is making a profit. Check on the Internet for a list of local accountants. The accounting system you create now should be designed to grow and expand when your business grows, and an accountant can help you do that.
It is best to take accounting seriously from the start of your business. Even if you are a small organization without any employees and with no desire to gain investors, you will still have to pay taxes and report your earnings. Accountants can assist with the reporting by creating a simple system for you to track your profits and loss.



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