Accounting plays an important role in creating value and ensuring accountability. So, in this article, we will learn “how does accounting create value and accountability?”
How does Accounting Create Value?
Value is a collection of long-term beliefs, thoughts, concepts, and perceptions that come together to form a single norm that allows people to accept the right and ignore the wrong.
Accounting contributes to the development of value perception in the following ways:
1.Demonstrate integrity and accountability:
If accounting procedures are practiced correctly when keeping accounts, corruption, bribery, and asset misappropriation can be kept under control, ensuring account transparency.
2. Debt repayment awareness:
Accounting plays a critical role in eliminating the fear of becoming a loan defaulter. As a result, it inspires a meaning value of not defaulting.
3. Developing a religious sense of value:
Religious importance includes making proper use of God-given resources and lowering unnecessary costs.
The philosophy of “cutting your coat according to your fabric” can thus be practiced in both person and institutional life if accounts are kept properly.
4. Responsibilities to society and the state:
VAT, tariffs, excise, and income tax are among the government’s major sources of revenue.
Accounting allows accounts to be accurately recorded, which decreases the tendency to avoid paying taxes.
5. Preventing the development of a false shortage of goods:
Many traders seek to make more money by inducing a fictitious commodity crisis, which is counter to market values.
Accounting encourages the development of positive values while discouraging the development of negative values.
6. Fraud and forgery must be avoided at all costs:
The chances of fraud and forgery among officers and staff are significantly reduced when proper accounts are kept.
As a result, they become cautious of money laundering and seek to eliminate anomalies.
How does Accounting Create Accountability?
If a single person is given a particular task, that person will only be responsible for that task. Remaining accountable to a third party entails responsibility.
Accounting’s position in ensuring accountability is described as follows:
1.The firm’s internal accountability:
People are empowered for revenue, cost, and expenditure in a modern decentralized framework so that they can focus and concentrate on accumulating results for their higher authority to address their various queries.
2. Shareholders, creditors, and investors must be held accountable:
People who work in bookkeeping and management for a company must ensure that the prepared statement depicts the invested sum clearly and that the profit received matches the invested profit.
If economic transparency is found to be lacking, both economic and non-economic matters will devolve into chaos.
3. Accountability to the government:
Concerned government officials have a legal right to inspect if government regulations are being followed correctly in industry.
They must check to see if government taxes, VAT, and duties are being paid correctly. Accountability is ensured by correctly kept books of accounts.
From the above discussion, we can say that accounting plays a significant role in creating value and accountability in every field of life.
You can also read:
- Why accounting is called the language of modern business?
- What is the importance of accounting?
- Top 25 questions and answers-introduction to accounting
