All companies use accounting to report, track, execute and predict financial transactions. The main functions of accounting are to store and analyze financial information and oversee monetary transactions. Accounting is used to prepare financial statements for a company’s employees, leaders, and investors. Accounting also functions to ensure the payment of funds into and out of a company.
Accounting creates a fiscal history for any company. It is used to track expenditures from business operations as well as a company’s profits. It can also be utilized to predict financial success and the future needs of a company to create budgets and take advantage of new growth opportunities. Accountants use this information to prepare financial statements used by business professionals and government officials.
The functions of accounting in a business include the following:
Business Costs and Revenue
An important function of accounting is to track business spending in relation to income. Just like managing your personal finances, accountants record expenses and payments to keep an accurate and up to date record of the company’s funds.
Proper accounting ensures the company receives any payment they are due. An accountant tracks the profits of a business to ensure that revenue is continually flowing into their bank account.
Accounts payable functions to pay the company’s bills. They ensure the business pays for any money they owe and check that it is a legitimate charge. They also help set the due dates for payments so a company can best manage their own funds based on when money is coming in.
Accountants deduct employee wages from company funds for paychecks. They are also in charge of managing employee benefits if they are paid out of an employee’s income. Accounting may help decide how employees are compensated for their work based on how wages affect the company’s profits.
Accountants use digital systems to store and calculate data. If a company is publicly owned, it must also prepare both quarterly and yearly reports for shareholders detailing the assets, profits and losses of the business. Privately-owned companies also utilize fiscal reports like these to understand the financial resources of their firm.
Companies use accounting to perform regular analysis of how well the business is performing. Either an outside consultant or internal personnel will look at the business as a whole to determine what functions can be made more efficient based on financial outcomes. They may suggest changes to employee departments or streamlined costs for production to reduce waste.
Taxes and Compliance
A business must comply with government laws and standards from the Internal Revenue Service and the Securities and Exchange Commission, among other regulations. States also enforce monetary guidelines for businesses. Accounting is responsible for reporting the financial workings of the company and making sure they conform to all local and national laws and guidelines.
Accounting is in charge of setting a company’s budget. They use financial data from the past as well as projections for future income to compose annual budgets. Accountants also prepare budgets for individual departments and special projects within the company.