The significance of this financial procedure is the accumulation and reporting of accounting information regarding the cash flows, financial position, and the performance of an organization. Nicholls (2020) emphasize on the purpose of accounting by pointing out that organizations require accountants to assist in monitoring cash flow, ensuring statutory compliance, and budgeting. Accounting also assist individual in the society to analyze the current business situation such as profitability and future growth (Nicholls, 2020). Through the accountants, organizations are empowered to make informed decisions that not only impact the society but also relate to the management, investment, or funding.
Internal Role of Accounting
According to Makarenko and Plastun (2017), the role is embedded in accounting of organizational transactions through bookkeeping. Bookkeeping is extremely crucial as it facilitates the accurate capturing of transactions relating to an organization’s receivable accounts alongside payable accounts. Moreover, bookkeeping ensures that invoices are sent on a timely manner and mail is checked regularly.
Stafford et al. (2018) elaborate on the internal role of accounting by discussing on the significance of reporting to the management and outside entities like banks, shareholders, and money lenders among others. Through financial accounting, a business is empowered through financial statements that can be used in understanding the financial position or tackling complicated financial projects. Managerial accounting can on the other hand facilitate the differentiation between period costs and products to ensure that the organization’s products and services are optimally priced.
Benefit of Accounting Information to External Users
Organizations have outside consumers of accounting information and Turner et al. (2020) identify them as tax authorities, potential investors, product consumers, financial institutions, and vendors. All the identified users of the accounting information derive various benefits. For instance, money lenders and suppliers can establish the credit worthiness of the organization while investors can make decisions regarding whether the business is a worthwhile investment. Government officials require the accounting information to monitor tax compliance.
Essay Task 1 – The Art of Persuasion
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