What Are the Functions of Accounting?

Accounting is an essential element of any business, regardless of its size or industry. It is the process of recording, classifying, and summarizing business transactions to produce financial statements that provide insight into the financial performance of a business. But what are the functions of accounting, and how can they help your business? 
 

Recording Financial Transactions

The primary function of accounting is to record all financial transactions that occur within a business. This includes purchases, sales, payments, and receipts. These transactions are recorded in journals, which are then used to create financial statements. Accurate and timely recording of transactions helps businesses keep track of their financial performance and make informed decisions.

Classifying Financial Transactions

After recording transactions, accountants classify them into categories such as revenue, expenses, assets, liabilities, and equity. This process helps businesses understand their financial position and make informed decisions about how to allocate resources. 

Summarizing Financial Transactions

Once transactions have been recorded and classified, they are summarized into financial statements such as the balance sheet, income statement, and cash flow statement. These statements provide a snapshot of a company's financial performance and help stakeholders understand the financial health of the business.

Auditing Financial Statements

Auditing is the process of verifying the accuracy and completeness of financial statements. It is typically performed by an independent third-party auditor who examines financial records, transactions, and internal controls to ensure that the financial statements are a true and fair representation of the company's financial position.

Budgeting and Forecasting

Accounting also helps businesses plan for the future by creating budgets and forecasts. By analyzing past financial performance and current trends, businesses can estimate future revenues and expenses and create a plan to achieve their financial goals. 

Accounting is a critical function for any business. It helps keep track of financial transactions, understand financial position, and plan for the future. At MK Bookkeeping, we provide CFO services, bookkeeping services, and other business services to help grow businesses in all industries. 

To learn more about the services we offer, please click here. To contact us, please click here or call us at (416) 451-3811.