Accounting allows businesses to calculate their profit and perform analyses. Accounting is important for determining if a company's earnings reports are accurate, making it important for stockholders and regulators.Continue Reading
A company needs to earn a profit to thrive, and basic accounting is important for determining whether its revenue is greater than its expenses. While basic accounting is fairly simple, finding all areas where a company is spending and earning money is potentially challenging.
Investments tend to make the process more complicated. Companies need to invest to grow, but the cost of an investment changes over time. In addition, companies have the ability to change how they deal with investments in order to pay less in taxes. Accountants are able to analyze this data and determine better ways of reporting revenue, spending and investment.
Noticing changes over time is also difficult, and companies rely on accurate accounting to determine if their tactics are working well. Tracking changes in customer interest after an advertising campaign, for example, requires tracking sales before and after the campaign has begun. Accountants are able to collect this information and factor out other variables that can cause changes. Most accountants now use computer tools to help them deliver more informative analytical reports.Learn more about Accounting
Preparing a profit and loss statement for a business entails calculating the net profit by knowing information, such as revenue, net sales, cost of goods, gross margin and operating expense for a certain period of time, as noted by the Edward Lowe Foundation. To prepare a P & L statement, which is also called an income statement, it is important to know what different terms mean and any equations needed to determine the net profit.Full Answer >
A payroll ledger is a document used by businesses to track how much the business spends on payroll. This document also tracks how much the company pays in taxes and benefits, such as retirement matching or health insurance premiums.Full Answer >
A breakeven analysis is important in evaluating a business investment because it allows owners or operators to understand the costs that must be overcome to earn a profit. If the breakeven point is perceived as too challenging, operators may opt to avoid the risk of making the investment.Full Answer >
The gross profit percentage, or gross margin, tells the percentage of money a company keeps from its revenue after direct costs are accounted for, and it indicates a company's gross profit margin. To determine the gross profit percentage for a business selling goods, a person takes the company's sales and then subtracts factory ahead, direct materials and direct labor. The person then divides the resulting value by sales to get the gross profit percentage.Full Answer >