How does accounting provide a vital service for everyday business?

Question

How does accounting provide a vital service for everyday business?

Answer 1

That's going to be in chapter 1 of your accounting textbook, probably on the first or second page of the chapter.  Here's an online textbook:

http://www.principlesofaccounting.com/ch...

And here's what this book says about accounting:

They [accountants] capture information about the transactions and events of a business, and summarize that activity in reports that are used by persons interested in the entity.  

Accounting is a set of concepts and techniques that are used to measure and report financial information about an economic unit.  The economic unit is generally considered to be a separate enterprise.  The information is potentially reported to a variety of different types of interested parties.  These include business managers, owners, creditors, governmental units, financial analysts, and even employees.  In one way or another, these users of accounting information tend to be concerned about their own interests in the entity.  Business managers need accounting information to make sound leadership decisions.  Investors hold out hope for profits that may eventually lead to distributions from the business (e.g., "dividends").  Creditors are always concerned about the entity's ability to repay its obligations.  Governmental units need information to tax and regulate.  Analysts use accounting data to form their opinions on which they base their investment recommendations.  Employees want to work for successful companies to further their individual careers, and they often have bonuses or options tied to enterprise performance.  Accounting information about specific entities helps satisfy the needs of all these interested parties.

FINANCIAL ACCOUNTING:  Consider that financial accounting is targeted toward a broad base of external users, none of whom control the actual preparation of reports or have access to underlying details.  Their ability to understand and have confidence in reports is directly dependent upon standardization of the principles and practices that are used to prepare the reports.   [External users - banks, creditors, investors - anybody who does not work for the company but has a legitimate reason to review the company's financial standings.]

MANAGERIAL ACCOUNTING:  In sharp contrast to financial accounting, managerial accounting information is intended to serve the specific needs of management.  Business managers are charged with business planning, controlling, and decision making.  As such, they may desire specialized reports, budgets, product costing data, and other details that are generally not reported on an external basis.  

Accounting is how a business knows what they own, what they owe, what they've earned, what they've spent.  It tracks all the financial date over time so that income, expenses, assets, or liabilities can be looked at for any month, quarter, or year and compared to any other month, quarter, or year.  It's a planning tool and a management tool.  

That help?

Answer 2

Accounting is the core of business. A business' main goal is to make money. Accounting is the process for keeping track of all the money the company has made, is making and hopes to make, while also providing a record of how said money has, is and will be spent.