Benefits of Implementation a Good Accounting System Essay - 3

Benefits of Implementation a Good Accounting System - Essay Example Accounting system requires three financial accounting documents; the balance sheet, which determines financial position of the business, income statement, which shows if the business is making a profit or loss and finally and cash flow statement which shows money inflow and outflow in the business. Business activities are run by money given to the management body by the owners. Therefore, a financial statement is useful in monitoring the effectiveness of management. Financial statements also act as a tool used in making an assessment. These statements show how management spent resources allocated to them in the process of reducing the company’s cost and increasing profitability (Kieso and Weygandt 34). It is the work of the accounting department to make such assessments and give a report. Good accounting system helps a company’s stakeholder to make economically informed decisions. The decisions made are based on the information received after analyzing financial statements. Business decisions are always based on accounting information. The accounting system is also very important for record keeping. Information collected from numerous sources is received, analyzed and communicated to the prospective users for decision making. Based on accounting details, company records can be used to make monetary policies. Efficient accounting system helps to detect deception by putting in proper internal control mechanism to monitor events (Kieso and Weygandt 47). Effective and efficient tracking of internal events can be achieved by having a good accounting information system in place.