Every business owner and Accountant should know this fact and understand the concept thoroughly well that a business cannot stand of its own and also can’t survive without a strong accounting system in its support.
A backbone is most important part of a human body because without a strong backbone no human being can stand straight of his own. Also each and every communication channel which connects body organs to the brain passes through the backbone, hence backbone in human body plays a vital role of holding all communication channels in the body which carries signals and messages from organs to the brain and from the brain back to various organs.
It means a human body can’t function without the help of a strong backbone as it provides a robust communication channel between organs and the brain to form the central nervous system so that what so ever decision is taken by the brain each and every organ performs its functions in accordance with that, and this becomes possible because of signals received from the brain through the communication channels. A human body works in a perfect order because there is backbone to hold these communication channels strongly and firmly.
Now let’s draw a parallel for business organisation: a business organisation functions through various employees that it hires. There are departmental heads who lead various departments which are vital organs of a business organisation.
Day in and day out these departments take thousands of decisions and majority of these decisions are financial decisions. To take these decisions a lot of input is required by the decision makers.
Who provides this vital inputs for decision making? and who records the action taken by various departments based upon the decision taken at the top levels of the organisation?
It is the robust accounting system of the organisation which maintains all financial records and provides all important inputs to the decision maker based upon those records. It is clear that accounting system is providing majority of communication channels to a business organisation.
Hence accounting for a business organisation is similar to the backbone of a human body that is why we say that “Accounting is the Backbone of a Business”