The purpose of accounting

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Post 1 Accounting

The purpose of accounting is to help understand the critical details about a business such as performances, assets and liabilities and cash flows  of that business. This information is used to show companies how to manage, invest or lend money to businesses. Because we live in an information age, accounting is important for businesses to use a system to identify, record and communicate activities. One part of accounting which records transaction of events, is called Bookkeeping. It is one of the most common used accounting, for credit checks, checking accounts and tax forms. Accounting helps track income and expenditures, playing a vital role to businesses.

The Internal role of accounting is to serve the organization’s internal operating functions. Internal users of accounting, such as Human resource mangers, Service managers and Marketing manager, that directly manage the business, use internal reports that are specifically for that company or business needs. These internal users make decisions based off the internal report.

Just as there are several internal users of accounting, it is also external users of accounting. External users are users outside of the business that do not have direct access or limited access to the organization’s accounting information.  There also different types of external users of accounting, that does not manage the business, but uses financial information to make a decision. These users are Lenders, which loans money to an organization. Lenders use accounting information to evaluate if an organization will repay its loans. There are suppliers. Suppliers use accounting information to inquire about a customer before extending credit. There are also Customers, that uses the accounting information, to evaluate the stability of suppliers. Then there is contributors. Contributors, mostly to nonprofits organizations, uses information to evaluate the use and impact of donations.

Accounting purpose in society helps people analyze businesses current situations, its profitability and future growth.

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Post 2

The purpose of accounting is to gather and report all financial performances from a business. The information gathered is then examined and decisions are made in regards to building the business or making improvements. Accounting is in charge of all transactions. Collecting and requesting missing invoices from vendors, keep all vendors information up to date, cutting checks for monthly statements, and catching and editing mistakes that are made along the way. Accounting keeps all records up to date and accurate. 

Accounting internal roles are basically what manages the business. Each internal role in accounting is important. The internal roles include employees, managers, owners, managers, and directors. Each individual in each category have to do with ever day decisions needed to be made from the organizations. They are in charge of making sure every information inputted is accurate. They are mostly important because it makes it easier for shareholders and stakeholders to better understand the financial statement. This makes it extremely important for them because they need to know if they will be affected in a positive or negative way by investing in this business. All the work done internally will affect the outcome of the organization. This is what attracts the external users to the organization. 

External users include shareholders, customers, external auditors, and lenders. Shareholders are investors who hold a share of the company’s stock. They decided what to do with the stock if to sell, hold, or buy. Customers are those that when searching for new potential suppliers, they focus on the financial reports to make sure they make a good decision on who they choose. External auditors are those who make sure that a companies financial report is accurate. Lenders are creditors who examine the business’s financial reports to make sure that they will be able to repay any loans taken.