Why is Accounting so Important?

Do you own a business? Are you thinking of starting one? Being your own boss is not a simple task. Anyone that has ever tried to do so can attest to that.

In fact, many times it seams that when starting your own business, you end up working more than what you did when you were working for someone else.

One of the things that all businesses need to be aware of is the importance of their accounting. This goes for everyone, no matter how small your business is.

Why do I need accounting?

Every business and especially small businesses need accounting. This is because accounting is and can be defined as a information science that collects financial information for individuals and businesses.

Thanks to those principles the information that is collected can be easily read and understood, by anyone who can read them and since this information is specific to either a person or business we get a clearer idea of their financial standing.

What does accounting help me to do?

Depending on your goals there are many things that accounting can help either yourself or your business to do.

For example, when a business keeps good accounting records it is easy to keep control of important information such as what it costs to make an item, what it costs to sell that item and most importantly, how much money or profit was made from that item.

What each business does with this information depends on a lot of factors. Although, the majority of businesses utilize this information to establish pricing policies, forecasting for the future or simply just to comply with legal business obligations.

How many types of accounting exist?

Many people are not aware of it, but there actually exist various different types of accounting. Remember, accounting is a science that is changing, not only in Nicaragua, but throughout the world.

So how many types do you think there are? Well even here we won’t list them all, but to start:

1. 1. 1. Bookkeeping;
      2. Financial Accounting;
      3. Managerial Accounting; and
      4. Tax accounting.

Each type has different objectives and purposes. For example, financial accounting is mainly for outside stakeholders such as investors or to comply with local regulations, the information on these reports aren’t necessarily secrets, although some sensitive information may be shown on them at times.

While on the other hand, managerial accounting is usually for those that are within the company and sensitive information and/or even propriety information may be shown here because usually these reports are for controlling budgets, pricing policies and other important confidential trade information that you would not want in a competitor’s possession.

Make sure your accounting works for you!

So, with this in mind, do not think that accounting is something that you can just put to the side or give no consideration to. To run a better business, it is imperative to make sure that your accounting is up to par with the information, reports and details that you need to better understand how to take your company forward.