Introduction

Doing business is not only paying salary, borrowing money from bank-a good entrepreneur must know what he or she is truly doing, an entrepreneur may invest on something that doesn’t give any earnings or an entrepreneur is doing business well and earning profit. To identify this business have to use accounting system to ensure that business is really growing. Every business must have accounting system even it is a small business.

1.0 Accounting

Accounting or Accountancy is studies of collecting, searching and recording financial information about business entity, which must be useful for managers, shareholders and other users. Accounting shows communication among financial information, and this communication is represented in the form of financial statement. Financial statement provides information in money about business resources controlled by management. Accounting art is making relevant, reliable and consistent report that is why accountancy is called “the language of business”.

Accounting that focuses on serving inside business users is called “Management Accounting” that provides financial reports to managers, shareholders and auditors. Management operating and decision making in a business are provided by management accounting reports.

Another accounting type is called “Financial Accounting” for outside people of business entity, including bank creditors, government agencies and financial analysts. This accountancy is different, because outside users need firm’s financial reports in very structured manner, consisting of many rules rather than in management accounting.

1.1 Benefits of an accounting system

The following shows accounting characteristics and benefits for a business:

Protecting investors- Accounting system allows investors to ensure that their investments are safe. Investors are interested about their money and eventually money will come back as profit. Accounting standards helps to attract investors to invest their money to business, so accountancy increases investor confidence.

Regulatory compliance-Government agencies require all companies to have accounting system, because accounting system protects owners, investors and clients from cheating in a business that is why it is a beneficial for everyone. It provides accuracy in business transactions which leads to efficiency in business operations.

Assessing business performance- Accountancy makes easier to understand firm’s current situation or performance, owners can compare their business with other firms, so it helps to see their strength and weaknesses, makes it able to develop strategy for future planning, managers also can compare their current situation and past.

Objectivity- Means that financial information is objective and unbiased. It does not matter how costumer satisfied or not-sales numbers say themselves. Financial reports are consisted of accounting principles without emotional component. It is important to management to make wise choices in a company.

Organization-Accounting is a system that organizes complex data, accountancy is not only transforms a large volume of data, but it also summarize, classifies data in the form of reports. Hundred pages of data are not useful and needed, but accounting system transform data in such way if manager wants to find particular information, he or she will find it easily.