Introduction:-
Accounting is a must process for every business unit and all business organizations believe in having a proper accounting system by an experienced professional for a complete outlook of their financial records.
Beyond the regular recording of the financial statement accounting have a diversified role in business organization which make it an essential process to be done by every business department for a smooth process also accounting statements once made is responsible for various tax liability for a business organization as income earned is taxable and if you do not pay the tax calculated on your income the you can get into major issue with income tax department.
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There are various accounting components you should know for understanding the process of accounting:-
- Recording: Whenever a sale is done or a purchase is done within the firm the same should be recorded. The process of understanding various financial transactions within the firm and recording the transitions in the accounting book is a necessary process. The process is also known as book keeping and here all the transactions which are related to finances in the firm are recorded in proper manner.
Here these transactions are recorded in a way that one has an entire track of financial transactions which is further helpful in creating an analysis of financial statements and other financial work in the process of accounting for the firm.
- Summarizing: Once you have proper recording of all the financial statements. The next part of accounting is summarizing wherein you make a summary report of all the financial transactions made within a firm and this summary is prepared in a manner that you are able to understand the savings, expenditure, investment and all other aspects of a firm through accounting standards.
- Reporting: The people responsible for accounting prepare a summary with the help of a bookkeeping process and then they further give the report of the entire summary to the owner quarterly, monthly or yearly as desired by the owner as the owner of the firm should always know about their financial records and statements.
- Analyzing: At this step all the financial analysis is done so that a person knows what to do to enhance their finances and how to save and where to invest. So that they are able to grow their business and reduce their unnecessary expenditure.
