Accounting allows organizations to identify how much money is coming in and being spent. Without accounting there is no way to accurately predict cash flows, raise money for projects, or know if you can afford to purchase equipment or hire new staff. Good accounting also allows for grant applications to be more accurate in requesting funding for projects. Without good accounting, an organization has little hope of effectively expanding and maintaining that expansion.
The end product of accounting allows the user to generate reports to show the organization's monetary transactions and net worth. The two most helpful summary reports are the balance sheet and income statement.
A balance sheet shows an organization's assets, liabilities, and net assets. The basic layout of the balance sheet is based on the following formula:
ASSETS = LIABILITIES + NET ASSETS
Below are samples of balance sheets.
An income statement shows an organization's revenue, expenses, and net income. The revenue and expense categories are determined by you when you build your chart of accounts.