Function Of Accounting L1 Flashcards
record all financial transactions.
Recording financial transactions
Transactions are logged in a general journal using a double-entry bookkeeping system
Maintaining accurate records
track expenditures and revenues, forming the basis for further financial reporting
Creating journal
Once transactions are recorded, accounting facilitates the preparation of essential financial statements
Preparing financial statements
summarizes an organization’s assets, liabilities, and equity at a specific point in time.
Balance sheet
known as the profit and loss statement
Income statement
provides insights into cash inflows and outflows
Cash flow statement
identify trends, measure profitability, and evaluate operational efficiency.
Analyzing financial data
the creation of budgets and forecasts.
Budgetting and forecasting
Using historical data to predict future financial needs and opportunities for growth.
Financial planning
Ensuring that funds are allocated effectively to meet organizational goals while minimizing waste
Resource allocation
ensures compliance with legal and regulatory requirements
Compliance and reporting
Financial statements are prepared not only for internal management but also for external stakeholders
Preparing reports for stakeholders
Maintaining a clear fiscal history enables organizations to prepare for audits effectively.
Facilitating Audit
Effective accounting practices help identify potential risks
Risk management
Regular analysis reveals vulnerabilities in cash flow or profitability that need addressing.
Monitoring financial health
controls within the accounting system can help detect and prevent fraudulent activities
Fraud prevention
helps organizations track costs associated with operations to ensure they remain within budgetary limits.
Cost control
