Importance of Accounting in Modern Life

Importance of Accounting in Modern Life

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Unit one

Accounting skills and knowledge involve the entire process of gathering. Summarizing, analyzing and recording of financial transaction and data with aim of making sound decisions. Accounting knowledge can be applied in daily life and impact on long-term operations of the business which is involved in the particular time. Financial manager and entrepreneurs with accounting skills are able to determine the directions of the business in regard to profits generated and losses suffered. For students with knowledge of accounting are able to make rational decisions on their performance and grade determination which may involve an entire period of study. By recording and analyzing data on specific spreadsheets are able to identify their weak subjects and formulate mechanisms to improve their overall performance.

The skills will enhance proper time management and determination of time spent on each assignment accorded in the course of learning. Additionally, through accounting and proper record keeping, one is able to track expenditure and managing of resources which are considered scare and limited in most cases. Budgeting skills and management are enriched in accounting knowledge when individuals want to record inflow of resources and adjusting spending mechanisms and procedures. Therefore, accounting knowledge is important and crucial in our daily life.

Unit Two

Trial balance involves an internal report of the business which is prepared and determination of financial situation in a specific period of time. The primary purpose of the trial balance is to ensure that all debts are equal to credit reports which translate that unbalanced journal entries will lead to making inaccurate financial information and conclusions which are important in decision making. The trial balance can be entered manually or by incorporation of computerized technology where statements are generated automatically. The general ledgers are important to prepare internal reports by accountants since transactions which are captured reveal important information about the business and companies.

To determine the financial position and state of any business balance sheet is prepared to determine major cash flows and equity of the business. The role of a balance sheet is to provide comprehensive financial information to creditors and owners of the business with aim of determining creditworthiness of the business. User of information contained in balance with current creditors, company management, customers and competitors. Businesses assets, capital and liabilities are expounded in details so as to ensure decisions are rational and updated. Therefore, trial balance and balance sheet can be termed as important documents which reflect financial position of the company which can be used interchangeably.

Unit Three

To ensure proper record keeping and smooth running of accounting operation in business the records should be kept and updated on cash basis. Cash basis will ensure that transactions for revenues and expenses correspond with payments which are made on basis during the entire period of business operations. Under the accounting principles cash basis accounting is allowed for the purpose of taxation for smaller entities and is conducted within expected accounting principles and skills. Cash basis offers the personnel who are not familiar with more intricate requirement for accrual basis of accounting in any business. Moreover, the method offers proper tracking of inventory systems, when there are no requirement for providing audit report and comprehensive service delivery to the business.

Cash basis system of accounting tends to be simpler to be understood as compared to other systems of accounting method. The approach involves simple and single entry of transaction since the restaurant structure involves simple process with no any level of complication since complex accounting program in the business will contribute to drawing back of business operations and reduced customer satisfaction. However, the approach may limit levels of decision making by the management in the business.

Unit Four

Financial statements are important to investors and entire company in role of decision-making as it captures the operations of the business. Financial statements that are in conformity with accepted principles of accounting should be accurate and understood by current investors and potential investors to the business. Well presented financial information will enable the investor to interpret results of the business operations to plan for a profitable future and business relations. Investors will be able to determine and evaluate the level of growth of the business as it captures company resources and assets with clear indication of future expansion of their products and services.

As investor to make some decisions one requires to information which are tabulated and presented in respective financial statements. Therefore, the financial presentation cannot be ignored by investors as it translates to economic position of the business at any particular period which is referred to as financial period. By understanding the contained information investors are able to determine and evaluate possible risks surrounding the business and its entire operation with aim of making investments. For a competitive investor to gather information must and should incorporate all financial statements.

Unit Five

To run profitable restaurant business as investor you need to know the inventory management business. These translate to profitable business operations which involves calculation of cost of goods which are sold in accurate manner and approach. Options for restaurant inventory control are limited to major three categories which involve First-in, first-out (FIFO) and last-in, first-out (LIFO). FIFO is the best method of inventory control since involves dealing with perishable goods and if kept for a long time they will result to expiry thus incurring loss during the entire period of business of operations and management.

The desired method of inventory control is more preferred since inventory systems correspond with original cost of the goods which is more precise and accurate. Through the use of inventory systems managers will be able to determine the accurate depletion of goods to mitigate the levels of losses which may be incurred. Moreover, the method will match the actual cash flow of the related goods and products with aim of increasing net income and profit generation. Nevertheless, the method is associated with several shortcomings during the long-run of the business operation and management. These include mismatching of total revenues and costs and yields higher income during taxation.

Unit Six

Bank reconciliation is essential tool which is necessary for preventing and detecting any fraud from taking place in any organization. They help in identifying any form of accounting and bank errors by providing a comprehensive explanation on detected difference between accounting and cash balances which are reflected in bank statement of any company. The aim is to ensure that all transactions are covered thus reducing probability of errors from occurring. Accountants are responsible for providing an explanation on any form of difference that may be detected and realized during the process of preparation and presentation of report to stakeholders and interested party.

To ensure competency in preparation of the bank statement the person who is involved should and not supposed to access the recording of transactions which involves the recording of cash and disbursement of receipts which are involved. The major purpose of division of the task is to ensure that in case errors are identified and detected during the stipulated period are accessed and adjusted by an independent person who may not influence the results of reconciliation and bank statements. The task of preparing and capturing of transaction is done at accounting department level and preservation of required documents and records.

Unit Seven

Funding for the restaurant business and deciding of business location may be difficult especially if the person involved lack prior knowledge and experience on restaurant management. However, leasing is advantageous because it allows you to inject the capital towards upgrading of the existing infrastructure such as kitchen, dining-area and promotional facilities. Further, leasing will have few legal procedures and requirement during the first phase of operations.

Unit Eight

Accounting skills are important in daily life as individuals are able to learn on how to make investment decision with proper tracking of expenses and income flow in any business. Without accounting, skills and knowledge will be difficult in formulating personal budget and making decisions related to business organization and management. Moreover, when one is equipped with accounting skills will enhance making timely payment and run any form of business in profitable dimensions. Budgeting skills are responsible for making business-oriented projections and resource management.