To successfully run a business you need data, records, reports, analysis, accurate information about assets, debts, liabilities, profits of the business; and this is the main reason why Accounting is Important for the growth and expansion any business.
Accounting information is of great importance to the management of a business since they are saddled with the responsibilities of making decisions on behalf of the business organization.
No management will make an appropriate decision regarding the business without reasonable accounting information to backup.
For decision to be made, it has to be based on genuine facts and figures.
The information which regards to the financial position of the business, such as; profit and loss, cost and earnings, liabilities and assets, etc is provided by Accounting to the management. This is why the importance of accounting in business cannot be overemphasized.
Management depends on statistical data and information that accounting provides in order to make the right decision.
The main motive of Accounting is to systematically record financial transactions in the books of accounts and to ascertain the profit-loss and financial position of a business.
Some of the functions of accounting include: ascertainment of profit and loss and financial position, interpretation and analysis of accounts and statements, development of accounting system, a collection of statistical and economic data, formulation of financial principles and financial planning and controlling results as per plan, etc.
Accounting in modem age is directly related to financial management. As a result of expansion in scopes of business, management now depends on various accounting data and information in taking decisions.
Accounting prevents the misuse of assets, increases production and profit, controls costs and helps increase the efficiency of the overall management. The roles being played by management is very important in the development of a business organization and cannot be overlooked.
The functions of management are planning, organizing, collecting business elements, motivating, coordinating, controlling and budgeting, etc. An efficient accounting system is needed for management functions to be successful.
There is no end to accounting system because it shows the financial position of a business entity by identifying the economic events and recording, analyzing and presenting them.
Some of the importance of Accounting in parts of Business are stated below;
ACCOUNTING IMPORTANCE IN PLANNING
Proper planning is very necessary for the successful completion of various activities involved in management.
Planning like; cash planning, sales planning, procurement planning, determining the quantity of stock, development planning, fixing up target-profit, etc. are dependent on accounting data and information which are available to the management of the business organization.
ACCOUNTING IMPORTANCE IN ORGANIZATION
Accounting plays a very important role in the proper execution of the key functions of the management organization.
Accounting helps management by providing financial information like percentage of profit over the capital, capital investment position, management efficiency in controlling, etc.
ACCOUNTING IMPORTANCE FOR MOTIVATION
Motivation is important in business as labor-employees are to be motivated in order to achiev expected performance. Financial or monetary reward is one of the main factors responsible for motivation of personnels.
The management is to have a proper knowledge of the financial position of the business before providing financial benefits to workers. Accounting helps management by providing them with financial records.
ACCOUNTING IMPORTANCE FOR CO-ORDINATION
One of the main functions of management is to achieve the final target of the business by coordinating various activities of different departments. Accounting helps in coordinating various activities of different departments of the business.
It also helps the management in the adjustment of purchase with sales, an expenditure with income, sales with debt receivable realization, etc. to a great extent.
ACCOUNTING IMPORTANCE IN CONTROL
The main functions of management are planning and controlling. Controlling is vital for completion of activities according to plan.
ACCOUNTING IMPORTANCE MEDIA OF COMMUNICATION
Accounting plays a vital role as a media in communicating various information from different departments, business, and management plan of actions to various departments.
Accounting is regarded as one of the best media of communication in supplying information regarding purchase and stock, time of purchase, cost of purchase and sales price, etc. to the management
It is the function of Accounting to collect and provide information about the business to various interested parties.
ACCOUNTING IMPORTANCE IN BUDGETING
Budget Preparation in various departments of the business is an essential factor in running a business organization. Accounting gives the historical information which is needed in budget preparation.
ACCOUNTING IMPORTANCE IN PROFESSIONAL ADVICE
An efficient accountant helps the management by providing them with valuable professional advice which will aid in the development of its business.
The role of accounting is very important in this aspect and the efficiency of management depends on the efficient use of accounting data and information supplied by the accountant. Accountants are regarded as efficient and successful managers in developed countries.
Accountants are included in the management team in big organizations. It can be easily said that Accounting and Management are dependent on each other.
MANAGEMENT IS UNIVERSAL
Accounting is required at every step of an organization. And accounting information is required for management. Accounting helps management in planning, organization, coordination control, budgeting, etc.
All the financial and economic information that is needed by an organization managing process is delivered by accounting. Management is the internal user of accounting information.
In this competitive world of business, management has to be fast in its decision making.
Accounting provides information that enables the management to make prompt and important decisions for the business. Accounting is regarded as the “Language of Business” because of the role it plays in decision making.