Describe the purpose of accounts in an organisation. Explain why it is important to keep accurate financial records

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Describe the purpose of accounting for an organisation.

In this activity I am told to describe the purpose of accounts in an organisation. I have to explain why it is important to keep accurate financial records.

Accounting is based on the recording of financial transactions, planned or actual, and the use of these figures to produce financial information. Accounting is important to business success for many reasons.

Record transactions:

Keeping business records up to date and accurate is very important for running the business smoothly. The business owner must keep a record of all of the money coming in the business (from sales) and all of the money going out, such as expenses. If a business fails to do so the business may find itself not chasing payments, forgetting to pay bills or even more seriously in trouble with HM Revenue and Customs (HMRC). If the business does not record its transactions correctly, it cannot report its financial performance accurately and therefore tax payments may be wrong. It is very important for Tesco to keep a record of its transactions. They need to be very well focused on the information about the sales and all the expenses. Tesco is a very large organisation so they need to keep records so they can see how much profit they have made or how much loss they had to face compare to the previous month or year.

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Monitor activity:

Records will be updated on a regular(ideally daily) basis and therefore provide a good indication of how the business is doing in terms of sales, receiving payments, paying expenses and so on. The owner of the business would realise if money going out seemed to be on the increase if money going out seemed to be on the increase while sales were dropping off. Monitoring activity should involve keeping an eye on the bank balance to ensure there are sufficient funds to meet day-to-day expenses. Tesco monitors all its activities. They keep an eye on the money in ...

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