Welcome to this chapter that I will use to take you through the basics of accounting and its importance to your business.
Another segment that is important to note is the evaluation of assets and liabilities.
Evaluation of assets and liabilities means that All businesses must have assets and liabilities.
What are Assets? Assets simply mean the possessions of the business, while liabilities mean those amounts which are due or borrowed from other persons.
e.
g.
; a loan from a bank.
These assets and liabilities are used to prepare a statement of financial position or in other words a balance sheet.
A balance sheet or a financial position is always required by banks and other financial institutions before they approve your loan application.
The government also uses it for tax assessment.
If you also wish to sell your business, then the prospective buyers also request for this document.
I know it sounds like a lot right now, but believe me when i tell you that all these documents are for your own good.
Other ways in which accounting can be helpful is that it can also be a tool of control; it enables you to control various expenses.
You can analyse the books of accounts and eliminate unnecessary expenses hence your profit is maximised.
Another way in which you can use accounting to benefit you and your business is by facilitating the credit transactions; as the business grows, you will see such a rapid increase in transactions such that you cannot master them all in your mind hence the need for accountancy.