Each organization has to organize its financial data as these data help in devising effective business decisions. So, there have to be set ways of recording, classifying, analyzing, and summarizing these data that can be interpreted and presented as essential financial information for management decisions.
These organized set of procedures, processes, and controls is commonly known as an accounting system. The accounting system can be manual or computerized.
These accounting systems are essential for three core function of accounting viz.,
- Accounting
- Auditing and Assurance
- Taxation
Today, we’ll discuss why this is necessary.
The accounting system helps any organization in four different ways;
- Track financial activities of the organization
- Evaluates organizational performance
- Historical Analysis
- Forecasting