The Impact of Accounting Records on the Performance of a Business Organization

An accounting system is an organized, productive plan for providing precise financial data and controls.
Accounting records are the original source documents, journal, and records that depict the accounting
flow of exchange of a business. Accounting records reinforce the creation of Statement of financial
position. They are to be held for various years, so that outside sources can examine them and confirm
that the fiscal summaries got from them are right. Auditors and taxing authorities are the establishment
destined to investigate accounting records. Accounting has been depicted as the way toward
distinguishing, estimating and conveying financial data to allow informed decisions and choices by the
clients of the data. It is portrayed as the language of business. It includes the plan of report and
exchange of transaction through an organization.

When we talk about record keeping and management, we think about managers making the correct
decision when making all the decisions. While making decisions, management needs the support of data
and information to determine the cost analysis or opportunity cost of a certain decision. Hence,
managers depend more on financial and economic information in accounting data. Medium and large
enterprises are more regular and pay more attention to bookkeeping while small business sometimes
lag. Financial records are an indicator of how the management of an organization is. Poor records
indicate lower education level among staff, finite resources, lack of command and comprehension, and
insufficient training.

Record keeping plays a vital role in performance of an organization. Accounting records and
management often go side by side as it is the duty of the management to keep the financial records of
the business up to date to avoid consequences. Present day accounting system generates financial
statements/information automatically on different software through the record of day-to-day
transactions of the business. However, it is still necessary to know the impacts of these accounting
records on organization, how it can be beneficial and unfavorable for the organization. Following are
some:

Benchmarking

Benchmarking is developing a threshold of best practices and judging other activities based on that
baseline. In benchmarking comparison is done. A company compares its recent financial position or
other accounting record with last year’s budgetary goals and operating results. Not only prior year’s
performance but compare the records/evaluation of financial statements with other organizations’
performance and gains. It gains an independent viewpoint about how well the company performed in
contrast with different organizations. Also, it creates a competitive environment internally and
externally as it creates an opportunity for improvement, encourage individuals/organizations for
creative ideas which gives more value to the business. Managers should always be vigilant when
comparing due to forged records and window-dressing of financial statements.

Performance management
Appropriate record keeping gives proof of how the exchange was dealt with and proves the means that
were taken to agree to business norms. The financial statement provides details and accurate
information regarding operating expenses and incomes which helps to identify employee’s fraud, theft,
wastage, and bookkeeping errors. Hence, it is the foundation on which the modern-day business
depends. Decision making becomes easier when records are maintained and there are more chances to
grow. Times is saved when regular bookkeeping is done and there is no loss of information. The
company knows where the money is going as the business keeps track on where the money is going or
coming from which in return keeps track on how much the business spends in contrast to its income and
value. This helps the organization to finance the budget efficiently and be cost effective.