Why Accounting is important?

Why Is Accounting Important?

Accounting is among the primary activities of a business enterprise, It helps internal and external stakeholders to make much better business decisions by giving them accurate financial details. It is not merely beneficial but a necessity for almost any successful business.


Accounting is a broad field and includes bookkeeping, invoice processing, tax preparation, accounts reconciliation, payroll processing, financial reporting, accounts receivable and payable etc. Accounting provides information to analyze businesses financial operation. 


It can be divided into types like financial accounting and management accounting.

Accounting plays a vital role in running a business because it helps you track income and expenditures, ensure statutory compliance, and provide investors, management, and government with quantitative financial information which can be used in making business decisions.

The accounting information is very important for the management or the decision making the body of an organization. To decide, it has to be based on genuine facts and figures. For planning at every level of management, information is crucial.

Accounting gives the management the information regarding the financial position of the business, such as; profit and loss, cost and earnings, liabilities and assets, etc.

That is why the importance of accounting in business is very large.

Management cannot make the decision without reasonable information for backing it up.

There are three key financial statements generated by your records.

  1. The income statement provides you with information about the profit and loss
  2. The balance sheet gives you a clear picture on the financial position of your business on a date.
  3. The cash flow statement is a bridge between the income statement and balance sheet and reports the cash generated and spent during a specific period.

Importance of Accounting in parts of Business are described below;

  • Importance of Accounting in Planning

Proper planning is very much needed for the successful completion of various management activities.

This planning’s cash planning, sales planning, procurement planning, determining the quantity of stock, development planning, fixing up target-profit, etc. are very much dependent on accounting data and information.

  • Accounting Importance in Organization

Accounting plays a very vital role in the proper execution of the important functions of the management organization.

Accounting helps management-organization by providing information like percentage of profit over the capital, capital investment position, management efficiency in controlling, etc.

  • Accounting Importance for Motivation

Labor-employees are to be motivated for achieving expected performance. Financial reward is one of the main motivating factors of work.

The management is to be aware of the financial position of the business for providing financial benefits. Accounting helps management by providing necessary information for taking proper decisions.

  • Accounting Importance for Co-ordination

One of the main functions of management is to achieve the final target of the business by coordinating various activities of different departments. Accounting helps in coordinating various activities of different departments of the business.

It also helps the management in the adjustment of purchase with sales, an expenditure with income, sales with debt receivable realization, etc. to a great extent.

  • Accounting Importance in Budgeting

Preparation of various budgets is essential to run the business successfully. The historical information which is needed in the preparation of the budget is supplied by Accounting.

  • Accounting Importance in Professional Advice

An efficient and honest accountant helps the management with valuable professional advice for the development of its business.

In this aspect, the role of accounting is very important. The efficiency of management depends on the efficient use of accounting data and information.

Management accounting

Management accounting is liable for monitoring internal business expenses than allotting these expenses to products or services produced by the business. Its actual purpose is usually to provide related, correct, on time information to supervisors that will use these in making decisions and enhance the company’s profitability.

Financial accounting 

Its purpose is usually to give data that helps to evaluate a firm’s financial background and present performance. It includes income statements, balance sheets, and statements of cash flows.

Reasons Outsourcing your Accounting Operations is the Right Choice

  1. Better use of time.

By outsourcing your accounting operations, you free up valuable time that can be better spent elsewhere.  Pouring over the books on back-end office operations can be a huge hassle that takes away precious company time.  This time can be better spent on daily operations and bringing in new customers.   Get the distractions of in-house accounting out of your office by outsourcing your bookkeeping.

  1. Cut down on costs.

Outsourced accounting operations save you money by eliminating costly benefit packages to a full-time or part-time employee.  When you outsource accounting, you only pay for the actual accounting, nothing else.  This saves in productivity costs as well as payroll costs.  The cost benefit analysis of outsourced accounting vs. in-house bookkeeping can save up to 40% in monthly costs.

  1. Reduced Fraud.

According to Association of Certified Fraud Examiner’s study released in 2012, most common victims of fraud are privately owned small businesses with less than 100 employees with an astounding median fraud amount of $147,000. This is due the fact that most small companies don’t have access to a controller or CFO who could look at the KPI and metrics which show abnormal activity in the transactional and billing data. Accounting controls and external audits are responsible for 26% of the cases in the study for detecting or preventing fraud. With Outsourced accounting small businesses can afford a CFO/controller who can look for fraud signs and implement proper fraud protection controls.

  1. Scalable options.

When you outsource your accounting operations, it becomes simple to expand and grow your business or find places to cut down on spending.  Accounting firms in Dubai can provide you with lists of options, giving you valuable feedback and suggestions that will raise your profits at the end of the day.  Whatever your long-term goals are with your business, earning more money—and keeping more of it—will help you achieve them.  Essentially, outsourcing gives you tons of flexibility and options.

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