Accounting is essential to your business.
As an entrepreneur and business owner – you will either do-it-yourself, get someone else to do it for you or outsource it to a firm.
As your business grows, the distinctions between the different types of accounting will become increasingly important.
So, what are they?
Most people think of accounting as a laborious activity performed by people who are ‘good with numbers' and often confuse it with the narrow concepts of record-keeping and bookkeeping.
Bookkeeping is recording the sales you've received and the expenses you have made using receipts, invoices, checks, credit card transactions and other transactions source documents.
Accounting of course is much broader than that.
- “Accounting” is the system that measures business activities, processes that information into reports and communicates these findings to decision-makers”.
- The accounting system produces financial statements that report on an organization's business in monetary amounts.
- Accounting is used by individuals, businesses, investors and creditors, government agencies, taxing authorities, non-profit organizations and others such as employees, consumer groups, labor unions and the general public.
For small business owners, your most valuable time will be spent on financial and management accounting.
- Financial accounting provides information to people outside the business including creditors and the government for tax purposes.
- Management accounting generates information for you, the person who manages the operations of the business.
- This will produce how much you are spending on your products or providing your services in a way that you can see where you are lacking and where you are doing well.
- Note, accountants also perform cost accounting, budgeting and internal auditing.
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