Importance of Accounting in an Economy

Accounting is no doubt, the universal language of business and figure. Those that fluently speak the language are called accountants. Without appreciating the importance of accounting, business and financial environment will be full of financial trouble, global economic meltdown and lack of direction.

Now, what are the importance of Accounting?

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Importance of Accounting in an Economy

Conducting business without a proper accounting system in place is like building a house without a solid foundation. Such a building will collapse and in a similar way, a business without a proper accounting system will eventually go into liquidation.

In the business where there is no proper accounting system, there would be;

  • No proper records of financial transactions.
  • No laid down procedure for processing accounting transactions.
  • It would be easy to perpetrate a fraud and corrupt practice.
  • It would be difficult for owners to know whether they are making a profit or loss.
  • The owners will be unable to determine whether they should continue to be in business or diversify.
  • Decision making becomes very difficult.
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Accounting results form the basis of Government Taxation.

Accounting information is used to prepare the government budget for resource allocation. The only solution for an effective decision-making process, for investors and all interested parties, to be assured that their investments are safe and for economic growth is proper and well laid down accounting structures.

It is on the basis of the foregoing that accounting is regarded as very important in every economy and has been introduced as a compulsory course to students in business and allied subject areas at both tertiary institutions and professional levels.

The person charged with the responsibility of recording business transactions in books of accounts is called the Book-keeper or Accounting Technician while those charged with the responsibilities of preparing the financial statements and analyzing them and writing a report for decision making are called Accountants.

Vital Links on some Accounting Topics

  1. Financial Accounting Topics
  2. Cost Accounting Topics
  3. Watch Accounting videos on Youtube
See Also:  Revenue Expenditure & Capital Expenditure

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