Importance of Accounting

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Importance of Accounting Alisha Logue Importance of Accounting There are many different reasons why businesses need accounting. It provides information on what your business has done and how much it is worth. Accounting also provides easy-to-understand plans for business operations. Without it, you do not know how your business is doing. Banks, creditors, development agencies, and investors require it. With the three types of accounting: managerial accounting, tax accounting, and financial accounting; you have a successful business. (Katz & Green, 2007) Managerial accounting, used by managers for planning and control of the business, is forward-looking and attempts to predict the results of management decisions. Tax accounting, used for calculating and reporting taxes of the business, is important for avoiding penalties for noncompliance and for minimizing how much money you have to pay in taxes. Financial accounting, used by banks and outsides investors, is a formal, rule-based system intended primarily for absentee owners, bankers, investors, and regulators. (Katz & Green, 2007) Financial statements are a huge importance in a small business. They are important for the fact that they articulate the information flow from income statements through the statements of retained earnings. Without financial statements, you would not be able to keep your business running. They provide critical information of how your business is running and shows what/how it needs improvement. (5 Reasons to Hire a Small Business Accountant, n/d) Business Planning is an accounting firm, which can act as advisor and perform business reviews to provide information that will be important for key financial reports that your company will rely upon to make other important business decisions. Networking and Referrals, because of the respect that they receive in the

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