Importance Of Maintaining Accounting System

There are many components involved in running a successful business. One very important component is accounting. Creating and maintaining accounting systems is important for many reasons. Accounting systems help companies know how their business is doing financially, in particularly if the company is growing or failing. Organized financial records are also easier to access. Maintaining accounting systems also helps the company know who owes what and what amount they are due to receive. Accounting systems help businesses analyze and predict future trends for sales. Another reason bookkeeping is important is because it records facts, if a company were to be accused of a crime it would have the information to prove or disprove it’s position. Research shows that businesses that begin with an accounting system are more likely to stay afloat longer than businesses that do not. The most important reason to create and maintain an accounting system it is legally required by the Internal Revenue Service. The IRS requires that every business record all their financial information for taxes each year. If the IRS finds suspicious activity in the financial statements provided, the

The assets are found by adding liabilities and stockholder’s equity together. Liabilities are the company’s debt or obligations that derive from normal business actions. Liabilities usually include the word “payable” such as accounts payable, dividends payable, notes payable or income taxes payable. Stockholder’s equity is the stockholder’s assertion on the assets of a company. Stockholder’s equity can include common stock, preferred stock, or retained earnings. The equation for stockholder’s equity is the total number of assets minus the total number of liabilities. Liabilities, assets and stockholder’s equity are only going to be found on a balance