Q:

Why is accounting information important?

A:

Quick Answer

Accounting information is important for decision making, record keeping, and discovery and prevention of theft. The information is also useful when applying for a grant or loan. Availability of accounting information creates a good reputation for an organization and enhances an individual's credit score.

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Full Answer

Accounting is the logical and comprehensive documentation of financial transactions of a business, organization or a group. It is the process of storing, sorting, retrieving, summarizing, analyzing and reporting details of these transactions.

Accounting is the primary measuring tool in business. A business owner uses accounting information to gauge the financial performance of his enterprise. Accounting information is important to internal stakeholders, including business owners, managers and employees, and external stakeholders such as lenders, donors and the general public. External users, such as financial institutions, use a business's financial information to evaluate the ability to repay a loan. Potential investors use accounting information to assess funding needs for the organization. Lenders look at assets and liabilities to determine whether the business is a safe investment.

Accounting information provides business owners with the relevant information to keep the business financially sound. Businesses and organizations analyze income to determine availability of funds for upcoming projects. Generally, accounting information is presented in the form of financial statements, including a balance sheet and an income statement.

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