All businesses must deal with accounting daily. It is a crucial process for determining the financial health of a company, monitoring gains and losses, keeping track of assets, staying compliant with taxation requirements and financial regulations, and more. But what does the term accounting actually mean, and how can your business handle this complex concept in a simple, straightforward way?
In this post, we will attempt to answer both questions, while also providing tips for simple accounting software you can use to streamline your business’s bookkeeping and some additional resources.
Defining Accounting
Definitions of accounting are usually complex and multifaceted—not surprising for a process that encompasses so much detail and information. In the simplest of terms, accounting is the process of recording information that pertains to the financial transactions of a person or business. The complexity creeps in when talking about the tracking, retrieval, summary, or reporting of this information—all steps that can also be referred to as part of the accounting process.
In other words, Accounting or accountancy is the measurement, processing, and conveying of mostly financial and related information about businesses and corporations. Accounting is sometimes called the language of business.
It measures the results of an organization's activities and communicates this information to stakeholders, including investors, creditors, management, government, different institutions and regulators.
People working professionally in this field are called accountants. The terms accounting, business accounting, financial accounting and financial reporting are often used interchangeably, yet they don't always mean the same thing.
Accounting distinguishes a couple of fields, including:
- financial accounting,
- management accounting,
- external auditing,
- tax accounting and
- cost accounting.
Accounting information systems are designed to support accounting functions and related activities.
Financial accounting reports an organization's financial information, including the preparation of financial statements, to the external users, such as investors, regulators and suppliers. Management accounting focuses on the measurement, analysis and reporting of information for internal use by stakeholders.
The recording of financial transactions is known as bookkeeping, of which double-entry bookkeeping is the more common system.
Learn more about what is bookkeeping and how does it work here.
Streamlining Accounting
For an individual, accounting is often simple, involving little more than tracking expenses and earnings, budgeting on a weekly or monthly basis, and paying taxes each year. While a piece of home accounting software can be useful for individuals, many people are content to handle their budgeting using spreadsheets and other manual tools.
For a business, accounting is quite a bit more complicated. For one thing, companies are just bigger, which means they have more transactions to track and are often trading in much larger volumes. Additionally, business accounting has more stakeholders. More people are looking at a company’s accounting insights and using them to make decisions, compile reports, or execute other functions. As such, accounting information needs to be tracked, categorized, and organized in a way that is informative, useful, and easy to understand for anyone who looks at it. Where an individual can develop an idiosyncratic accounting strategy that only they truly understand, such an option is not realistic for a business.
The question, then, is whether streamlining accounting is even possible in a business environment.
Perhaps counterintuitively, the best way to streamline accounting in a business setting is to split it up across multiple different statements. An individual’s accounting may consist mostly of tracking their spending—a practice that helps with budgeting and responsible money management. For a business, streamlined accounting isn’t just about lists of transactions, but about documents that define and organize the information around those transactions meaningfully. Such statements may include The Income Statement, The Balance Sheet, The Statement of Cash Flows, and The Statement of Shareholders’ Equity. Each one is intended to track certain financial activities—and provide precise financial insights—spanning specific periods.
Learn more about The Income Statement in our detailed guide here.
Learn more about other financial statements and their importance in our statement overview, What Are the Five Types of Financial Statements And How to Understand Them here.
Streamlining Your Accounting
Many businesses at least start by tracking their accounting manually in spreadsheets and other documents, simply because this method is what most people are accustomed to. As your business grows, though, you may find yourself typing in Google queries such as best free accounting software, open-source accounting software, or cloud accounting software, seeking an affordable program to help you track accounting information and prepare financial statements more efficiently.
At ZarMoney, we are proud to offer the accounts receivable and accounts payable software you need for your small business. Use it to track everything from payments to inventory, all while enjoying terrific features such as accessibility from any device, collaborations with teams, Google Calendar task integration, and more.
The full-featured single-user version ZarMoney is an accounting software FREE download, making it a perfect option for small businesses or sole proprietorships. At the same time, ZarMoney can scale and adapt to suit larger companies.
Compare it to Great Plains accounting software (a Microsoft accounting software option also called Microsoft Dynamics), or other SAP accounting software options on the market. We believe that on the list of accounting software products available currently, ZarMoney is the most adaptable to the needs of any business.
Check out ZarMoney's comparison with comparable Quickbooks Intuit's plan, one of most commonly used accounting software solution on the market, and discover which features you would miss not and which ones you need the most in this detailed comparison resource, The Battle of Accounting Software: ZarMoney vs. QuickBooks.
Try ZarMoney as Your Cloud Accounting Software FREE Today
Accounting has a simple definition, but it has never been simple in practice, which you can tell by the accounting software market cap. The Accounting Software Market was valued at $12.01 billion in 2019 and is expected to reach $19.59 billion by 2025, at a CAGR (compound annual growth rate) of 8.5% over the forecast period 2020 - 2025.
Learn more about accounting market cap here.
Accounting has been always an area where business owners tend to struggle, and should they do a mistake, even small error will cause a major headache down the road with IRS strict tax measures. So why making it more complicated than it has to be?
With accounting software such as ZarMoney, your business can manage its accounting requirements in a streamlined, collaborative, and all-around intuitive fashion. Give our cloud accounting software solution a FREE try or contact us to get your free expert opinion on market options. Find out why we are so confident that ZarMoney will be the best choice for your small or medium enterprise.
