Accounting is often referred to as “The language of business”.
It’s a way to communicate through numbers and financial data. It is important that the financial information is accurate and complete. A reliable financial information can help its users make sound business decisions.
To simply define, accounting is a systematic recording, summarizing and reporting of financial transactions.
Who are the users of the financial statements? Any person who will need access to financial information of the business such as:
• Owners
• Managers
• Employees
• Investors
• Creditors
• Customers
• Tax and regulatory authorities
Accounting can help us answer questions such as:
How much income did we earn this month? How about last year of the same month?
How much is the cash balance?
How much is my current obligation?
Did my utility bill increased or decreased compared to last month?
How much do we spend in terms of payroll and salaries?
What are these expenses about?
Is it a profitable to buy stocks of this company?
If I approve the loan of this company, do they the capacity to pay?
These and so on are being presented in company’s financial reports