The Role of Accounting in Business

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Accounting is a process used by businesses for many reasons. The process of accounting consists of recording all transactions that occur within a business and summarizing the information. An assortment of people then uses this information. Accounting can take place either manually or with computers using accounting information system software.


Accounting is a system used by businesses to track financial information. Businesses then analyze and use the information to make business decisions. Accounting uses a double-entry method where accountants record transactions using debits and credits to individual accounts. The individual accounts are all part of the general ledger, which is the place where a business keeps all accounts individually with balances.

Financial Information

Accounting plays a major role in businesses when it comes to the financial transactions of a business. Financial accounting records all transactions and summarizes the amounts on financial statements at the end of each month and year. Stakeholders of the business analyze the financial information. Stakeholders include banks, stockholders, owners of the company and employees. Stakeholders use this information to make lending and investing decisions.

Managerial Information

Managerial accountants also use accounting. Managerial accounting is an internal type of accounting. Managerial accountants analyze all financial information and use it to make internal company decisions. These accountants make decisions regarding plans for the business as well as budgets and forecasts.

Cost Accounting

Cost accounting is another important aspect of a company’s bookkeeping records; it plays a large role in manufacturing and retail companies. Manufacturing businesses use cost accounting to determine the cost of goods manufactured, break-even points and on-hand inventory quantities. Retail companies use a form of cost accounting to keep track of inventory levels at all times.

Tax Purposes

Accounting also plays a large role for tax purposes. Recording consistent, accurate financial records leads to an easier calculation of income taxes. The financial information transfers from the accounting information system to the appropriate tax forms. Accounting information is useful in paying other taxes, including sales taxes, payroll taxes and quarterly estimated taxes.


About the Author

Jennifer VanBaren started her professional online writing career in 2010. She taught college-level accounting, math and business classes for five years. Her writing highlights include publishing articles about music, business, gardening and home organization. She holds a Bachelor of Science in accounting and finance from St. Joseph's College in Rensselaer, Ind.

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