Accounting serves as the backbone of any business, providing essential information that helps in decision-making and strategic planning. It encompasses various functions, including bookkeeping, financial reporting, and auditing.
Bookkeeping vs. Accounting
While bookkeeping involves the recording of daily transactions, accounting encompasses a broader scope, including the analysis and interpretation of financial data. Both are crucial for maintaining accurate financial records.
Financial Reporting
Financial reports are generated periodically to provide stakeholders with insights into the company's performance. These reports include:
- Income Statement: Shows the company's revenues and expenses over a specific period.
- Balance Sheet: Provides a snapshot of the company's assets, liabilities, and equity at a given point in time.
- Cash Flow Statement: Details the inflow and outflow of cash, highlighting the company's liquidity position.
In summary, accounting is integral to business operations, ensuring transparency and accountability.
