How important is it to have income and expense accounting in my business? Every company or business, whether large or small, needs to have an accounting system. The technical definition of the word accounting tells us that it is a system for controlling and recording expenses and income and other economic operations carried out by a company or business.
This information offers us the behavior of the company and tells us if the company is achieving the desired objectives, if we are obtaining profits or losses and shows the areas where you need to improve or pay more attention.
In other words, accounting is a key tool to know what situation and conditions a company is in and with this documentation, to be able to establish the necessary strategies with the aim of improving its economic performance.
For example, if we buy diesel for our truck, we will have to account for that expense to know the amount spent, how much it cost us, who the seller is, what date it was purchased, etc. Accounting takes care of all that and more.
What is accounting useful for us?
Being responsible for your company´s accounting, without being a professional in the sector, can end up being a real nightmare.
Accounting is a discipline that is basically used for three different things: recording money movements, knowing how much money you have and how much money you owe.
What is the origin of accounting?
Accounting has been present in the lives of men for thousands of years, it was used in a more rudimentary way in great civilizations such as Egypt or Rome, but accounting as we know it today, had its origin in the publication in Italy of the work “Summa de Arithmetica, Geometry, Proportioni e Proportionalita” by Luca Pacioli, which was dedicated to describing accounting methods of Venetian merchants, commercial usages, contracts and interest and exchange practices.
This document established double-entry accounting, the precedent for what is now known as “debit and credit” in accounting jargon. But, given that the ancient Italian republics and microstates were the great promoters of trade in previous centuries, these teachings were adapted and modified over time, without losing their original essence.
The result of the accounting of a fiscal year can be very useful and can indicate the goals, changes in administration, planning and execution for the following year. In addition, it is used to present our tax report, to present them to suppliers, to request credits. The use it can give is extensive and useful.
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