Every business person needs to understand the benefits of recording the business transactions in the proper books of accounts. Keeping proper books of account helps to determine the financial performance and position of the company. More so, it enhances good decision-making by the business. So, failure to keep proper books of account therefore, leads to a false picture of the financial performance and position of the company. So, this leads to poor business decisions. Companies like WorldCom, Enron, and Freddie Mac collapsed as a result of poor business decisions. Therefore, this article explains the importance of business accounting to business owners and others.
What is an accounting
Accounting is a systematic process of recording, analyzing, interpreting, summarizing, and communicating business transactions of a business. However, the financial statements to maintain by a business includes income statement, statement of financial position (Balance sheet), statement of cash flow, and statement of changes in equity. The benefits of business accounting include:
- Assessment of financial performance and position
The financial reports show the financial performance and financial position of business organizations. It helps the owners of the business to understand the performance of the business by keeping income statements. It helps to compare the financial performance between years
- Compliance with professional and statutory requirements
Keeping proper books of account by an organization helps the compliance with all the necessary statutory requirements. However, these statutory requirements include income tax, pension etc. Also, it helps compliance with the professional standards.
- Establishment of budget
Keeping proper books of account plays a key role in creating a budget for a business by supplying all necessary information required for the establishment of a budget. So, business financial projections are created based on the historical financial information contained in the financial records.
- Filing of statutory returns
More so, keeping proper financial records helps the company to submit the required financial statements to appropriate authority such tax authority and corporate affairs commissions (C.A.C.).
- Obtaining financial credit facilities
Keeping proper books of accounts helps to the business obtain the necessary financial credit facilities. However, these facilities include loan, overdraft, debenture, and others for the expansion of the business.
In conclusion, understanding the importance of keeping proper books of account enhances the decision of the business owners. Additionally, it helps to decide on either to employ a full-time accountant or outsource their business accounting to a professional and competent accounting firm.
Afeez is one of the founding partners of Marasas Consulting limited. He consults for both individuals and entities in the area of accounting, management, audit, tax, and investment. He has a wide range of experience both online and offline which allows him to provide relevant and timely professional advice and assistance to business owners with their accounting, tax, management, audit, and investment plans.
Afeez is a member of the Institute of Chartered Accountants of Nigeria (ICAN) and a member of the Nigerian Institute of Management (Chartered). He is a certified Google analyst and strategist. He earned his Bachelor degree in Management and Accounting from Obafemi Awolowo University, Ile-Ife, Nigeria, and earned an ordinary national diploma in Accountancy from The Polytechnic of Ibadan, Oyo State, Nigeria. He earned certification in “Excel Crash Course” and “Reading of Financial Statement” from Corporate Finance Institute, Canada.
Afeez is dedicated to helping clients achieve business success by helping them to establish solid and sound accounting, tax, and financial processes.