Renee’ Johnson “The Importance of Accounting in Business”
It important to take accounting in business because starting a business often requires entrepreneurs to understand and complete a variety of business functions. An important business function when starting a small business is accounting. In business there are endless stacks of financial documents, and accounting will provide a clearer picture for success in business. Whether you are an entrepreneur you mu9st keep records your business for tax and legal purposes.
Many small businesses started as a hobby or side business use cash basis accounting. This accounting method records and recognizes transactions when cash changes hands. It provides entrepreneurs with a simple method for maintaining accounting information. As companies grow and expand, they may need to change to the accrual accounting method. Accrual accounting is the most widely used method in business; it records and recognizes transactions as they occur, regardless of cash changing hands.
Forecast Financial Estimates
Entrepreneurs may need to provide banks, lenders or investors with a financial forecast relating to the new small business venture. This information is essential for obtaining outside financing for business startup costs. Entrepreneurs usually write a business plan, which includes an economic forecast, expected startup and monthly expenditures, and pro forma financial statements. This accounting information is heavily relied upon by lenders or investors to ensure the entrepreneur has an accurate and reliable picture of financial expectations.
Budget Expenses
An important accounting function for starting a small business is the creation of a budget. Budgets outline the expenditures needed for various aspects of the business. Entrepreneurs may budget capital for hiring employees, advertising strategies, inventoried purchases and other types of business expenditures. Sticking to a budget helps entrepreneurs avoid wasting capital on non-essential business items. Budgets can also create a historical record of how the small business spent capital for producing consumer goods or services.
Determine Profitability
Accounting is the predominant way a company determines its profitability. Although a small business may be able to generate high amounts of sales revenue, failing to generate enough profits may doom the business to failure. Entrepreneurs need to understand how well they are using assets to generate services and the costs of inventory compared with the company’s profit margin. Banks, lenders or investors may also require the business to release financial information to ensure that these individuals will be repaid in a timely manner.
Expert Insight
Small businesses may seek advice from public accounting or an individual public accountant (CPA). Professional accountants usually offer copious amounts of education, experience or expertise when helping the entrepreneur is set up their small business accounting operations. These individuals may also offer lower rates to small businesses to help defer start-up costs. Entrepreneurs may also need professional help when filing business tax returns and ensuring that all business issues are accounted for at year end.

Major Stock Exchanges

The New York Stock Exchange:
The New York Stock Exchange was first founded in 1792. This Exchange houses some of the nation's largest publicly-traded corporations, including McDonald's and Walmart. These large corporations make up what are known as blue chip stocks; companies that have achieved a level of success and stability reflected in the slow, but fairly reliable rise in stock value. Blue chip stocks are viewed as conservative investments on the NYSE. The majority of stock trading at the NYSE is done face-to-face on the Exchange's New York City trading floor.
NASDAQ:
NASDAQ is a virtual stock market. Unlike the NYSE, this stock market lacks a physical location and exists solely on the digital market through an electronic network of dealers and brokers. This exchange deals almost elusively with Internet-based companies and technological corporations. NASDAQ became a prominence in the 1990's on the wings of the tech boom that saw the rise of companies like Dell, Sun Microsystems and Cisco. Some of the largest tech corporations in the United States are represented on NASDAQ, including Google and Microsoft.
American Stock Exchange:
The American Stock Exchange is the third major stock exchange in the United States. The Exchange was originally created as an alternative to the NYSE, but that role is largely filled by NASDAQ. The National Association of Securities Dealers purchased the AMEX in 1998. Since that time the AMEX is used primarily for small-cap stock trading. A corporation's stock is considered small-cap if the corporation has a market capitalization or worth between $300 million and $2 billion.
Dow Jones Industrial Average
In 2011, a selection of 30 stocks chosen using portions of the NYSE, NASDAQ and AMEX are used to compile the Dow Jones Industrial Average. This figure is used as a barometer for U.S. stock market health and industrial trading, both domestically and abroad. The DJIA is also used to gauge the economic growth or detraction of the United States. According to the Investing Answers website, as of March 2010, the DJIA removed several of its original 12 stocks from average calculation, including General Motors, Citigroup and Cisco. The Difference between Stocks and Bonds
Stocks (Equities): Stocks represent partial ownership of a corporation. If the corporation does well, its value increases, and you share in the appreciation. However, if the corporation goes bankrupt, you can lose your entire initial investment.
Bonds (Notes): Bonds represent a loan you make to a corporation or government. For example, you can buy a US Treasury bond for $100, and get a guaranteed interest rate for 5-years, and can expect to get your $100 back at the end of that 5-years plus interest. Your risk is repayment of the principal (amount invested). Because loaning $100 to the U.S. government is much less risky than loaning $100 to the Brazilian government, U.S. government bonds pay a much lower rate of interest ("coupon") for borrowing your money.
Stocks and Bonds:
Stocks and Bonds they differ Stocks are equity. They represent shares of ownership in a Corporation. A Stockholder is actually one of many owners of a Publicly Owned Corporation. If a Corporation dissolves for any reason owners of Common Stock (the main type of stock issued) receive the value of the sold assets of the Corporation after everyone else is paid, including the IRS, Employees, Bonds, Accounts Payable, etc.

Bonds:
Bonds are debt. They are sold by the Corporation in order to raise money for various purposes for use by the company. Bonds offer an interest rate to the Bondholder for the period of time that the Bondholder owns the bonds. Bonds do not represent ownership, the bondholder could lose their investment if the Corporation dissolves, but are paid before owners of stock.

When you buy either bonds or stock, you pay money now with the possibility of getting more money later. But a bond represents a debt--the company that issued the bond owes you money to be paid when the bond is redeemed. A stock represents ownership. As a stockholder, you become a part owner of the company.

Works Cited:
Nickels, G., William, McHugh, M., & James, McHugh, M., Susan (2008). Understanding Business 8th Ed. www.investopedia.com/university/bonds/bonds2.asp https://en.wikipedia.org/wiki/List_of_stock_exchanges