Importance of Accounting

Many people do not understand the importance of accounting. You might be one of the many. If so understand stand this, power comes from knowing where money flows. Accounting is nothing more than the actions taken to gain that power. When you know where money is coming and going you have power.

Think of money as a river. It flows continually unless an outside force natural or unnatural stops it. We need water to survive. So we build a dam to collect and distribute the water. As owner of the dam we have to make sure our use is less than what the river and dam supply. We also have to ensure there is a proper amount of surplus in storage in case the river becomes dry. In addition, we have to let some of the water flow past the dam for the survival of our environment. The monitoring of the flow of water through the dam is similar to monitoring the flow of money through our home or business.

A company manager uses accounting to lead the direction of the business. Lenders and investors use accounting to guide whom to give their money. If you want to operate a profitable business you have to understand basic accounting terms. If you want money from a lender or investor, you have to create an accounting balance sheet.

Hopefully you now grasp the importance of accounting. The proper monitoring of your finances, called accounting, will help avoid bankruptcy and foreclosures. You will see it coming and be able to make adjustments before the money runs out. It will help you bring in more money by providing focus to an area that needs improvement.

Now the question what is accounting, should be a question of wanting to know how to implement and perfect for survival.

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