Accounting or accountancy is no doubt the universal language of businesses and figures. Those that fluently speak this language of business are called accountants. The importance of accounting and accountancy cannot be over-emphasized as the evidence is there for all to see.
Imagine what this world would look like if all means of communication are removed from our daily activities. The world would be full of chaos and anarchy you know.
How then do people expect businesses and financial environment to be free from financial troubles and global economic meltdown when a lot of people fail to appreciate the importance of accounting and accounting information in their daily business activities?
I urge you to learn the rudiments of setting up an accounting department for your business today if you are amongst those that have hitherto not appreciated the importance of accounting.
Are Accountants still relevant now that we have accounting software?
This has been the question on the lips of many uninformed people for over half a decade now. You will hear question like ‘do I still need qualified accountants now that I have fully automated my accounting activities?’. My standard answer to the above question is; ‘try ignorance if you this that education is expensive’. No amount of advancement in business technologies and artificial intelligence that can take the place of accountants especially if you are a hybrid accountant with all the next generation skillsets required of accountants.
In this article are some of the importance of accounting and accounting information.
IMPORTANCE OF ACCOUNTING AND ACCOUNTING INFORMATION SYSTEM
This section of this post will dwell on the reasons why a business enterprise must have one form of accounting or the other. Notice that the points discussed in this part of the article applies to both profitable and not for profitable organizations.
ANALYSIS PURPOSE/ DECISION MAKING
All our business and economically informed decision making are based on sound analysis of financial statement which is a product of accounting information system. Without a properly kept account, this objective will probably not been achieved and business executives will all be acting in blindness. Investors both current and potential base their investment analysis on accounting information. Information on: profitability, liquidity, efficiency etc are all obtained from the information provided by accounting information system.
No economy will stand well economically if records are not well kept and acted upon. Accounting is one of the primary vehicles of record keeping. Data are gathered from their various sources, collated, organized, analysed, interpreted and communicated to the end users for an informed economic decision making that will in the long run yield positive fruit. Countries are able to plan their economic activities are chiefly as a result of the valuable information gathered through all forms of accounting (making use of statistical tools). Governments use the records of companies to make fiscal and monetary policies.
PREVENTION OF FRAUD AND DISCOVERY OF FRAUD
Frauds can only be discovered and prevented in an environment where there is good internal control in place. And a good internal control cannot be in place where there is no form of keeping track of events. Accounting and accounting information system is the only way of keeping track of all these in an effective and efficient manner.
GETTING OF FUND AND LOANS
You cannot get loan from financial institutions if you cannot present your financial state of affairs in an acceptable manner. Accounting as a communication tool obviously have generally accepted formats which financial institutions and banks use as a basis for measuring the risk of a business.
REPUTATION AND CREDIT BUILDING
Reputation and business credit scores can be improved by the simple act of establishing and operation a sound accounting information system in an organization. The belief is that any company that has the got to have an accounting system in place will be efficient in all other aspects of business operations.
The above five points are some of the importance of accounting and accounting information. If accounting is not that important, why then did God Almighty bother Himself in becoming the first accountant? Oh! You don’t know that God is an accountant? If not, how then did we have record of the account of creation well documented?
PROVIDING INSIGHTS FOR FORECASTS
When analysed, accounting information which is a direct product of accountancy gives valuable business insights that can make the difference between a thriving and a struggling business. These insights are then used to make intelligent forecasts for the benefit of the business.
Well, now that you have known the importance of accounting, it is up to you to put an accounting system in your business. Ignore accounting and accounting information and watch your business and financial life go down the drain. You may also want to read my piece on the functions of accounting department to gain more insights into this subject matter.