Why Accounting is important for businesses

Why Accounting is important for businesses

Why is accounting for businesses so important? It’s a question that begs to be answered. One reason is that it has the power to impact every facet of a company’s well-being: shareholders, employees, suppliers, and even customers. Another reason is that complying with regulatory requirements for accounting can be an enormous burden on otherwise profitable companies. Accounting records are often the first place auditors look when trying to figure out what’s really going on at a company.

Financial statements are of little use when they’re not clear and understandable. For this reason, the accounting profession has set out a common set of rules (i.e., generally accepted accounting principles) that require companies to follow certain procedures for recording and reporting their financial activities. The point is to provide financial information in a manner that is comparable from one company to another and from one year to the next. A company not properly recording transactions or following generally accepted accounting principles can be fined, sued by investors and shareholders, and their management may lose their jobs.

Accounting is the process of measuring all the income, expenses and profit in a business with an objective to compute taxes that are payable to the government. One way it affects your company’s numbers is by calculating the profit margin which helps to determine how much profit each sale or unit produces. 

This can be difficult if everything isn’t in order through proper bookkeeping, accurate invoicing and keep track of payrolls.

Accounting is the recording, summarizing, analysis and communication of the financial information of a company to the stakeholders. Every transaction that happens in a business regardless whether it’s cash or inventory must be accounted for. This means all money earned and spent is tracked so you know exactly how much cash you have in your business.

Every business need accounting!

Every business is affected by accounting. Managers must prepare budgets, forecasts, and cash flow statements to assist in decision making. Business owners need to understand the financial health of their companies to make intelligent decisions in areas such as hiring, inventory levels, pricing strategies, etc. If a business fails to produce an income statement that accurately reflects its performance over time or if a company reports losses in some years but profits in others without any explanation for the swings in performance then investors and lenders will be suspicious of future profitability.

For financial reporting, normal accounting cycles are used to account for most transactions. The model year is the basis for many financial statements and involves the typical volume and value of a company’s sales and purchases that would exist in a calendar year.

To record transactions, accounts must be established with specific names, numbers, amounts, and a notation as to when the events occurred. These accounts represent classes of items rather than individual instances of goods flowing across the company’s cash flow. For example, all payments related to inventory (i.e., purchases and sales) must be accounted for under one account called “Inventory,” which is tied to the company’s profit-and-loss statement.


The bottom line is, accounting for businesses is so important and you need an  Accountant for your business to flourish. Thakur Chabert is a leading Accountants and Auditors firm in Uxbridge, London. Thakur-Chabert Limited is regulated by the ACCA (Association of Chartered Certified Accountants)

We offer a complete suite of services including Accounting, Taxation, Cloud Accounting, Audit, Company Secretarial Services, Business Advisory Services in London. g