Anyone who has worked in an office environment at one time or another has had to communicate with accounting. They are the people who pay and send the invoices that keep the business running. However, they do much more than that. Sometimes referred to as “bean counters,” they also measure profit, expense, and loss. Unless you are running a small business and acting as your own bookkeeper, you would have no way of knowing how profitable – or not – the business is without some form of bookkeeping.
Regardless of what business you’re in, even if all you do is keep a checkbook, that’s still bookkeeping. It is apart from even the life of a child. Saving an allowance, spending it all at once – these are accounting principles.
What are some other businesses where bookkeeping is critical? Well, farmers have to follow precise accounting procedures. Many of them manage their farms year after year by taking loans to plant crops. If it’s a good, profitable year, then they can pay off their loan; If not, they may have to withhold the loan and add additional interest charges.
Every company and every person needs to have some kind of accounting system in their life. If not, finances will take them away, they don’t understand what they have spent, or whether they can expect a profit or loss from their business. Staying on top of your bookkeeping, whether for a multi-million dollar business or an individual checking account, is a necessary activity every day if you’re smart. Failing to do so will mean anything from a bad check or posting a loss to a company’s shareholders. Both scenarios can be just as destructive.
Accounting is essentially information, and this information is published periodically in business as a profit and loss statement or an income report.