Question

Why is it important to keep proper financial records? What issues might arise if the accounting cycle is not fully completed every fiscal year?

Answer 1

Financial information of the organisation which tells us about the net profits, investments, capitals, liabilities, assets etc acquired by the organisation.

For every stakeholder the financial records of the organisation is very important in decision makings.

It is important to keep proper financial records as :

• to maintain transparency.
• to avoid frauds.
• to avoid misappropriation of assets.
• a regulatory requirement.
• to avoid cash defecation.
• to obtain financial supports.
• a budgetary requirement.
• for planning and execution of strategies.

There are certain issues which might arise if the accounting cycle is not fully completed every fiscal year. These are as follows :

• proper accounting procedures are not followed.
• there would be various incomplete accounts.
• audit of accounts is not possible.
• reconciliation of accounts is not possible.