Accounting in Daily Life
Accounting in Daily Life
What do you think when you hear the word “Accounting”? Of course, it is something related to finance. Everyone may be familiar with accounting terms. However, not all understand the meaning and application of accounting in daily life. Interestingly, we often carry out activities in our daily lives related to accounting whether we realize it or not. For example, when we receive a receipt after making a transaction, it is considered as an activity of receiving accounting information.
Accounting is the process of gathering, recording, summarizing, and analyzing financial transactions or data. It can be used in our daily lives because it maintains and expands the financial health of a business. Accounting plays an important role in running a business because it helps you track financial income and expenditures, management, and ensure statutory compliance which can be used in making business decisions. Therefore, accounting is a career that uses skills that are often used for daily activities too. It is true that until now accountants are in high demand in business or a company because it is essential in part of the business.
The application of accounting is indeed more synonymous with businesses. However, accounting for personal finance is very important too. The goal is to organize or record our finances so that they remain stable or can be said to be healthy. Unconsciously, people already use accounting in their daily life, for example, first for budgeting and managing your spending. We can know where and how the money we have is used. In addition, we can also record where and how much income we are getting for our finances. Then how can we apply accounting in everyday life, especially to manage our finances? We can start by making a journal for our financial records. Journals will record what our expenses are in a month, starting from the smallest expenses to the largest expenses. We can also record our income each month, so that at the end of the month we can find out how much expenses was occurs in this month and we can plan our spending for the next month. This can be a way to make our finances more effective and efficient.
Furthermore, we can make financial reports in the form of cash flows. For example, such as money for savings, spending money, money earmarked for a certain thing to an emergency fund. We can make it with a simple concept so that we can understand it ourselves. By making records properly, we can evaluate our finances. For example, reducing expenses that are considered less effective and efficient. The application of accounting makes it easier for us to plan finances in the next period so that we can have healthy finances. Our financial condition is arguably uncertain especially during the pandemic, so we have to spend money more efficiently based on our needs.
Secondly, accounting can be used for planning for the future. Accountants or auditors tend to look at their historical financial information to predict their current or future business. The financial report includes a balance sheet, income statement, statement of a change in equity, and cash flow. By looking at the historical financial information, the auditors can predict and present the financial report of an organization. Also, they can know what were the difficulties in the transactions. Therefore, having recognized the difficulties, auditors can solve those difficulties.
Thirdly, accounting can be used in business areas. If we have a business, you must implement that accounting knowledge in your life. For instance, if your current business is an online store, you must record every transaction to control the finances or money. Moreover, for every business that you do, you need accounting knowledge to gain profit and run your business well.
As a result, accounting has a great advantage in our daily life. The advantage that you get is you can know the income and expenses from our money by monitoring, controlling, and planning the finances. By implementing this accounting activity every day, it will greatly help to control your finances for a better result.
ECPI University. (2017, June 5). Why is Accounting Important in Everyday Life? https://www.ecpi.edu/blog/why-is-accounting-important-in-everyday-life.
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