Ask the Accountant

Q. “What is accounting?”

A. “This is an excellent question and we’re surprised we’ve not been asked before now!

According to Business Dictionary, Accounting is ‘…the systematic process of identifying, recording, measuring, classifying, verifying, summarising, interpreting and communicating financial information’. Or in summary, it’s the process or work involved in keeping financial records of a person, business, or organisation.

Accounting allows for the analysis of past financial performance and prediction of future monetary challenges/stability. This is achieved by examining results relating to profits, losses, productivity, sales trends and costs.

Accounting matters, as it documents how well your business or organisation is doing or to prove how much tax you should pay. HMRC, banks, credit lenders and investors will all require this accounting information.

Without accounting, it would be almost impossible for businesses to make short-term, and especially, long-term decisions. Excuse us whilst we don our superhero suits!

Thanks for the question. Come back next Tuesday for the next instalment of Ask the Accountant @ CAAS”