THE IMPORTANCE OF ACCOUNTING

Accounting is important for business as a way to document financial activity

and learn from the numbers. Your business needs basic accounting to report
income on tax forms and keep track of funds flowing in and out of your bank
accounts. According to Ovidia (2013, cited Srivastava, Lognathan, 2016), the
financial accounting information provides 46-50% of effective information data. This
is a large part of the information that is useful for business management decisions.

Accounting also important for small business owners as it helps the owners,
managers, investors and other stakeholders in the business evaluate the financial
performance of the business. Accounting provides vital information regarding cost
and earnings, profit and loss, liabilities and assets for decision making, planning and
controlling processes within a business. The main objective of accounting is to record
financial transactions in the books of accounts to identify, measure and communicate
economic information. Moreover, tax reporting agencies require you to keep books at
a minimum level that tracks income and expenditure.

In addition, accounting helps to make sure that stakeholders understand

the meaning of financial information, and they work with both individuals and
organizations to help them use financial information to deal with business problems.
It will be more easier for owners to track income and expenditures, ensure statutory
compliance, and provide investors, management, and government with quantitative
financial information which can be used in making business decisions at is relevant
and available without undue cost or effort.

Based on the annual report of Nestle, the qualitative and quantitative information
and analysis based on the Nestle’s historical experience and informed credit
assessment and including forward-looking information when determining whether
the credit risk of a financial asset has increased significantly since initial recognition
and when estimating expected credit loss, the Group and the Company consider
reasonable and supportable information that is relevant and available without undue
cost or effort. Nestle also have analyzed formal materials every two years to ensure
the company prioritize the key issues for their stakeholders and business which are
the analysis include nutrition, obesity, non communicable diseases, human rights,
supply chain, labour issues, marketing of breast-milk substitutes, marketing to
children and sustainability.
References

Annual Report (2017). Retrieved from

https://www.nestle.com.my/sites/g/files/pydnoa251/files/asset-
library/documents/pdf/nestle_in_society_report_2017.pdf

Annual Report (2018). Retrieved from

https://www.nestle.com.my/sites/g/files/pydnoa251/files/2019-
09/Nestle_Corporate_Governance_Financial_Report_2018.pdf

Srivastava, P., & Lognathan, M. S. (2016). Impact of accounting information for

management decision making. IJAR, 2 (5), 171-174