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The method of identifying, measuring, recording, and communicating the necessary knowledge related to the monetary transaction of an organization is known as accounting. At the end of each year, the businessman wants to see if they have made profits or incurred losses during the year. They want to know how much they owe and the number owed to them etc. To attain such information related to the business, it becomes essential to keep a proper record of every transaction of activity during the year. If the businessmen keep a complete systematic record of the data, he can know his purchases, sales, expenses during the year.
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Accounting is required for the management of financial transactions of an industry. Here are some of the benefits listed below of accounting
Accounting is helpful for the systematic manner and management to analyze the net profit earned and loss incurred during the year.
It helps the businessman to draft a balance sheet at the end of each year, which allows them to classify the financial situation of an organization. It highlights the value of assets and liabilities of the company.
With the help of recorded books of accounts, accounting helps the businessmen to pay off the relevant tax owes to the government.
The profit and loss account is prepared at the end of each year, which gives the net profit earned or loss incurred during the year. Thus, accounting brings information on the net results of all the business transactions.
The Balance Sheet is provided at the end of the accounting year, which discloses the financial position of the business. It also highlights the status and values of assets and liabilities of the company.
Financial accounting only includes the quantitative aspects rather than qualitative aspects. It is concerned with the work which can be of financial value. The non- financial work like employment relations, quality of goods, etc. These issues cannot be overlooked.
The Balance Sheet does not show the amount of cash which the firm realizes by the sale of assets. This is because the assets are not meant to be sold; they are intended for use.
Accounts are prepared based on the original (historical) costs. The financial statement does not show the effect of the changes in the price level. Many assets remain undervalued. Therefore, the value of assets does not help consider the financial position of the business.
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Financial accounting is also part of accounting. It is considered one of the main essential categories of accounting discipline. In financial accounting, one can learn how the company performs its financial information for different kinds of shareholders. We are reachable 24/7 for Accounting Homework Help and Accounting Assignment Help. Financial accounting helps in making the financial statement that includes the Balance Sheet, Profit/Loss Statement, and Cash Flow Statement, etc.
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