I have been asked by my line manager to prepare a report describing the purpose of accounting in our business.
Definition of accounting :
Accounting helps the business keep clear records of their incoming and outgoing finances; accounting is important A&M sports Ltd for a number of reasons and I’ am going to explain the most important ones.
It’s the basis of a good financial control, the business is able to keep track of their finances and be organised.
All expenditure and income are recorded this also helps our business stay organised and the business will know exactly how much profit they are making by subtracting the income with expenditure.
If these are not recorded our business may find it hard to chase up any payments for equipment we have sold, this could lead to cash flow problems also our business needs to make payments out accounting helps keep records of when and to whom we pay to because if we were unable to pay our suppliers we would run out of stock.
Accounting also helps us keep track of orders, levels of sales, amount and due of bills.
Keeping an accurate profit and loss account and a balance sheet is very important to our business we are able to see the business’s sales revenue and all the relevant costs incurred in earning that income.
The balance sheet shows how our business has done through out the year; this shows the value owed by the business and the value owed to other businesses.
The balance sheet also help us improve our business by showing us how the previous years have been and by looking at previous years we can also try and get better year after year.
Accounting helps us predict the future performance this gives us an idea of whether the business will do well and prepares us for any long/short terms problems that may occur, this is beneficial to the business because we have the chance to be ready for any problem that may occur and in certain cases maybe able to put money aside for future problems.
We are also...