3. Accounting in economic activities
One of the main accounting functions is to track the cash flow and to be aware of the changes in the economic cash flow. Where the economic cash flow indicates the details of expenses and income, which are used in income-generating activities. It also generates income and expense flows, which then help to account to analyze the cash flow. And then it is recorded with respect to accounting as a statement of the cash flow of the company. The statement includes the registration of the total cash generated and used in a specific period. The cash flow is made and derived from general business operations, investment or financing and donations. The cash inflow and the cash outflow define the cash flow statement. The total figure is calculated by adding depreciation and total income after paying taxes (Gul, 2016).
The economic cash flow plays a critical factor in determining the strength of the company.
The cash flow can be made from a complete company, and it can also be a particular project. The accounting and economic activities collectively form the financial statement and the state of a company. Accounting methods are used to maintain and analyze financial transactions in the company. And also the accounting helps to track the cash flow but not to change them.
The accounting is used to make the financial record of the company, and it can not be done without the economic cash flow. Accounting is about the collection and communication of all data collected from finances, including economic cash flow. Accounting also controls cash flow and the estimation of cash is also a function of accounting. The cash flow may change, but the accounting maintains the consistency of the change. The consistency in the accounting system helps analyze the financial efforts and then compares them with the economic cash flow according to the given standard. Consistency also allows transparency in a company’s financial statements.
Users of accounting information
Like, accounting is useful, in many different departments of a company. It facilitates the growth of a company. The operation of all the departments of the company must be registered, and accounting does. The users of the accounting information can be internal and can also be external. Managers, employees, and owners are the internal users of accounting. While the interested parties, the creditors, the customers/clients, the suppliers, the investors, the auditors are some of the external users of the accounting.
Management as an accounting user
Accounting in the management department is essential. The administration needs an accounting to analyze the performance of the company and helps them decide on the changes that must be made to improve the company’s results and helps give ideas to grow the company’s status. The management also needs the accounting information on the profitability and the productivity of the company, to plan and control the cost of sale and also the expenses. The accounting information also helps management to evaluate and estimate the capacity of the business to obtain more profits.
Accounting gives information to management to make decisions in the right direction.
In each company, the department of administration and accounts are the main departments. Because they are related to each other. The accounting department keeps track of the performance and financial statements of the company and management are analyzing that accounting information and making decisions in accordance with the performance of the company. It is said that accounting is the language of business. And the administration is the mouth of the matter. The efficiency of the management depends on the efficiency of the accounting information. Accountants are considered efficient managers because they know how to work efficiently and manage data with respect to the company (Mitchell and Reid, 2000).
Decision making is a vital role in the administration, and it is useless without the accounting data.
Managers can only succeed if they work according to the accounting and financial data provided. All information regarding the purchase of shares, a sale of the product, cost of sale, investment details and the appropriate time of purchase and product prices, statements of profits and losses, the performance of the company with respect to the generation of income, is provided by the accounting department. All these things are essential for management to make the necessary decisions to improve the company, management not only makes decisions but also has to manage the functions of the different departments, including the accounting department. Management includes the managers and directors of the company and they are responsible for making decisions, and they must guide the company in the right direction. This can not be done without the accounting information of your company.
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