Financial Accounting Basics Cheat Sheet

Accounting-Basics-Cheat-Sheet

Accounting is not confined to keeping a record of financial transactions. The scope of accounting is much broader and it can play a quintessential role in determining if a business would be a success or a failure. There is a considerable difference between bookkeeping and accounting. Today, the conventional definition of accounting has also ceased to exist because it is archaic, irrelevant and not very useful.

Importance of Accounting

Good accounting is crucial to the growth and longevity of your business, and it will help you. Today, the domain of accounting includes creating and managing budgets, forecasting future revenues, determining the best time to make major purchases, to keep track of expenses, to track the financial health of the business, to determine the adjustment or its need pertaining to operations or personnel, keeping accurate records of investors, banks and future investors or banks and measuring how fast or slow the business is growing.

Managing Your Money

In a nutshell, accounting is managing money but not in the traditional sense of keeping a record of what’s coming in and what’s going out. It includes much more. Take for instance the forecasting exercise. An accountant is needed to assess the probable revenue that would be generated in a certain period of time. This allows the accounts department and the owner of the business or senior management to determine what the budget should be, how the budget should be split into different categories and essentially how the funds of the business would be managed for a foreseeable period of time.

Its Role In Business

Accounting is no longer a clerical profession wherein the balance sheets, profit and loss statements along with cash flow statements would be merely created, submitted to the owners of the business and then stored in the stockpile. Accounting has to delve deeper into the profit and loss statements, balance sheets and cash flow statements. Accounting needs to assess the assets of a business, how much should be spent, how much money can be made and in what ways can the cash flow management or the entire financial management of the business be bettered.

The Industry

Accountants today have to work hand in glove with business development teams, operations personnel, compliance and customer service teams as well as the senior management to actually chalk out a business plan and then accounting would involve monitoring the path forward to ensure that things are moving according to that plan.