Accounting is used in businesses to keep a financial record of expenditure and income generated from the business. It is used to manage, track and report these incomes as they are a legal requirement for a business to have.

1. Unit 5 P1
Lewis Appleton 1 Mr McColgan
Accounting
Accountingisusedinbusinessestokeepafinancial recordof expenditureandincome generated
fromthe business.Itisusedtomanage,track andreport these incomesastheyare a legal
requirementfora businesstohave.
Recording transactions
It isessential forabusinesstorecordtheirtransactionssothat theyknow how much isbeingspent,
fromthistheycan make sure that theiroutcome isaffordable of theirbank balance.Accounts canbe
kepton spreadsheets suchasexcel but there are many specialistsoftware suchasSage and there
are accountancyfirmswhichat a price can alsoproduce the accounts.The transactionsbusinesses
needtorecord are all of the expenseswithinthe business,the reasonforthisissothat the data is
accurate and reliable,small expensesthatare notrecordedcan add up and disruptthe figures.The
recordsalsohave to be sentlegallytoHMRevenue andCustoms,thisisbecause of taxations.The
accounts maybe alsobe usedfor research.
Monitor activity
It isimportantfor businessestomonitortheirrecordssothattheycan make sure the expenditures
are affordable,theyare alsoable tosee if theyare makinga profitor loss.Thiswaytheycan see how
well the businessisdoingandbymonitoring ona regularbasistheycan see the changestotheir
income andexpenditure.Byregularlycheckingtheycanalsopredicthow the resultsmaybe inthe
future andhow muchprofittheycan expecttomake.If the recordsare monitoredregularlythenthe
bankbalance is notlikelytogooverdrawnandthisway theywill notexperience anypenalties.
Control
The control isbeingable toknowwhatis beingspentandwhatisbeingspentonand whatincome is
beingreceivedfromthe salesandotherincomes.Having agoodcontrol meansthat the businesscan
see whenmonitoringif theyare startingtomake lessprofitormore lossand predictaheadtobe
able to coverthe increasingexpensesandtake actionsonthe issues.
Management of the business
It isimportantfor the managersto knowhow importantthe accountsare because itgivesthema
basisof theirincomesandexpenditureswhichtheycanuse to planforthe business,monitorthe
movementinincome andexpenditure andfinallycontrol the flowof bothincome andexpenditure.
Withthe knowledgeof the accountsthe businessisable totake actionto increase the profitthat
theycan receive.The managersare responsible forthe expensessuchasstaff wages,dailyexpenses,
and productproduction.