The Purpose of Accounting in Business Management
Accounting is critical to the survival and operation of business. The base purpose of accounting is "to communicate financial information about a business to shareholders, stockholders and determine the health of a company's financial status." Within the business process of accounting, various components help executive management and decision makers to analyze financial objectives and goals.
Other People Are Reading
-
Financial Accounting Vs. Managerial Accounting
-
When accounting relates to the decision-making process of executive management through audit and review of accounting data, it is defined as "managerial accounting." Managerial accounting helps businesses develop strategies based on accounting data generated through financial accounting methods. Financial accounting is the collection of raw data reflected through transactions posted to the general ledger.
Fiscal Analysis
-
Fiscal analysis is a dynamic process. Management uses fiscal analysis to review corporate trends segmented into monthly, quarterly, semi-annual and annual analysis. An example of fiscal analysis accounting is the monitoring of corporate stock and how it affects shareholders with stock in the company. Fiscal analysis is also used for comparing industry financial indicators for projected revenue over a period of time defined by executive management.
-
Fixed Asset Accounting
-
Businesses monitor fixed assets to make key decisions based on "depreciation" of an asset over a period of time and the cost associated with depreciation. For example, an engineering process could be outdated, costing the business money. Management can compare machine upgrade or replacement costs and how they related to production of the end product. Fixed asset accounting plays a very important role in the value of an asset and is considered when businesses want to downsize, merge or expand operations.
Cost Accounting
-
Cost accounting in the business management is a tool used by executive management to establish budgets, develop financial forecasts and analyze the cost of operations. Executive management must determine through costs accounting ways to cut costs while staying profitable at the same time. Cost accounting methods are constantly reconciled and adjusted based on General Accepted Accounting Procedures (GAAP) for an up-to-date snapshot of what a business "total" worth is in any given fiscal period.
Lean Accounting Principles for Business
-
The latest accounting process used in business management is the lean accounting process. Lean accounting is corporate accounting for business management and is more concerned with helping managers understand the business accounting process in simplistic terms. The concept provides measurements "straight to the point" and defines through management information systems scenarios used to make decisions. For example, if a manager wants to know what directly affects the cost of an item, the lean accounting method provides a direct correlation between variables, such as labor efficiency, manufacturers' raw goods costs, shipment costs all in one process. The results lean accounting principles within the business process leads to increased cash flow, customer value, profitability and growth.
-
References
Resources
- Photo Credit juggling the figures. image by Aussiebloke from Fotolia.com
