Importance of Accounting

Accounting is essential to the running of any business or organisation. Organisations as diverse as ICI, Barclays Bank and Manchester United football club
all need to keep a close check on their finances.
At its simplest, money makes the world go round and accounting keeps track of the money.
Businesses depend on cash and profit. If businesses do not make enough cash or earn enough profit, they will get into financial difficulties, perhaps even go bankrupt. Accounting provides
the framework by which cash and profit can be monitored, planned and controlled.
Unless you can understand accounting, you will never understand business. This does not mean everybody has to be an expert accountant. However, it is necessary to know the
language of accounting and to be able to interpret accounting numbers. In some respects, there is a similarity between learning to drive a car and learning about accounting. When
you are learning to drive a car you do not need to be a car mechanic. However, you have to understand the car’s instruments, such as a speedometer or fuel gauge. Similarly, with
accounting, you do not have to be a professional accountant. However, you do need to understand the basic terminology such as income, expenses, profit, assets, liabilities, capital,
and cash flow.