Why is it important to have accounting?
Accounting plays an essential part in the running of an undertaking, as it helps track incomes and expenses, ensures statutory compliance, and provides quantitative financial information to investors, management and government to make decisions for enterprises.
Your records generate three important financial statements.
You will find information on profit and loss in the income statement
The balance sheet gives you a clear overview of your company’s financial position at a specific time.
The cash flow statement is a connection between the income statement and the balance sheet and the cash generated and spent over a certain time frame.
If you want to keep your business afloat, it is essential to keep your financial records clear and up to date. Here are only a few reasons why it is important, large or small, for your business.
It supports the assessment of business performance
Your financial records reflect the operating results as well as your small business or corporation’s financial position. That is, they help you understand financially what’s happening with your company. It not only helps you track expenses, gross margins and possible debt by cleaning up-to-date records, but helps you to compare your existing data with the past accounts and allocate the budget properly.
It ensures compliance with the statutes
Laws and regulations differ from state to state. However, proper accounting systems and processes help you ensure that your business is complied with by law.
The accounting function ensures proper management of obligations such as sales tax, VAT, income tax and pension funds to name a few.
It contributes to budget creation and future projections
Budgeting and future plans can make a business or break it down, and your financial records will play an essential role.
Based on historical financial data, business trends and projections are used to keep your business profitable. These financial data are best used when well structured accounting processes are provided.
It supports the submission of financial statements
Companies must submit their financial statements to the Company Registrar. The listing entities are required both for direct and indirect tax filing purposes to file them at stock exchanges. In all these scenarios, of course, accountability plays a key role.
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