All around the world, accounting is called the language of business. It is widely used technique to relay the information related to the business. It takes upon the responsibility to administer in depth comprehension of the theory of accounting that refers to the application of general principles of accounting to the empirical day to day functioning of the business in order to exhibit the different accounts of income and expenditure fairly. It showcases the financial position of a business. Accounting is the process of evaluation and explanation of bookkeeping records.
Following points will further put light on the role of accounting in a business and also why accounting is called the language of business:
Accounting interprets bookkeeping records- accounting helps in not just evaluation but drawing inferences after evaluating the bookkeeping records and further helps in making of financial and economical information which includes quantification of business transactions and other events. In a way, accounting helps in simplifying the crude data of bookkeeping and makes it easy to comprehend by anyone.
Accounting furnishes vital information to keep the business afloat- in order to run a business successfully and earn rich dividends; it is of paramount importance to track the profitability and viability at regular intervals. To aid this cause, it is important to keep proper knowledge whether the business is earning enough profits or it is incurring losses and has enough funds to pay off the debts. All this information related to the viability of a business is furnished by accounting in order to help management form policies to keep the business profitable and solvent.
Accounting helps in deciding future course of action for a business- after the proper evaluation and interpretation of information furnished by the accounting statements, it is used by the management to take decisions related to future course of action. Accounting statements represents the economic and financial position of a business entity. Hence, keeping of accounts is not important alone but its evaluation and interpretation done by the accounting is equally important to take decisions related to the future of a business.
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