Every business engages in various economic transactions. A person or company cannot keep a record of all these transactions and thus requires accounting.
Why is Accounting a Service?
Accounting consists of a set of quantitative data on economic entities and is meant to help businesses make decisions. Its services include providing information on financial data, identifying trends and patterns in payroll services, and reporting them to the management teams of companies. The information provided by an accountant is useful to monitor a company’s performance and can be used for future planning and budgeting.
Accounting can be broken down into three main categories: cost accounting, managerial accounting, and financial accounting. All three types of accounting require an accountant to create reports that help companies understand how they are performing and what is affecting their success. Whether the accountant is creating a report on cash flow or evaluating an investment opportunity, their work is invaluable to a company’s growth and sustainability.
For example, a company may choose to extend credit terms to its customers and will need to record the trades in its accounting system. This allows it to know who owes money, how much and when the debt is due.
Accounting services also help a company comply with tax regulations and ensure it does not pay too much in income taxes. These types of tasks are usually performed by the accounting department or an external accounting service provider. This enables businesses to focus on the things they do best and not get bogged down in tedious, time-consuming accounting activities.