All companies are unique in some way, but they all, one way or another, have the same subject of accounting.
First — it’s what they own and at whose/what expense this happens (debts and equity), which is called the Balance Sheet.
Second — it’s what their revenues are, what their expenses are, and accordingly the difference between them, to understand the financial result of their activities.
The need to control these parameters seems obvious, but in real life most small companies don’t have them, and many larger ones have something similar to the second, i.e., an income statement, but without disclosing a significant part of important information.
These two reports are only part of a large amount of universal analytics, but too much depends on them to neglect them. In addition, these two reports make it possible to control, at least from a technical point of view, the correctness of accounting, because by their laws, the movement of funds within a company and their exchange with the outside world is similar to energy exchange in a closed system with the outside world and is described by the second law of thermodynamics, which can be simplified to: “energy (in our case money) neither disappears nor appears from nowhere.” Only redistribution of capital occurs through changes in form and state, as well as through exchange with the outside world. Therefore, the change in your capital/Balance Sheet equals your financial results through your activities.
Because if they don’t, it means some part of your processes that you account for and that move or transform your money are not reflected in accounting, or are reflected incorrectly. This can be caused by technical accounting errors, or behind these words may be a process of appropriation of your property in favor of a foreign system.
Accordingly, the broader the accounting, the more technical control points in such accounting, the harder it is to hide accidental or deliberate errors.
This is, first and foremost, a control tool, and only then an analysis tool.
The same applies to the ability to quickly confirm any value by uncovering the entire necessary layer of operations and, most importantly, their essence. And given the large volume of different processes in any company, consolidating all of them into two reports and having the ability to quickly decipher a specific figure is an extremely non-trivial task if accounting is done by collecting all documents such as invoices, shipments, payments, etc.
Therefore, global accounting is usually reduced to accounting in the form of accounting entries that are generated from primary documents and reflected through the flow of money from one account to others.
Each of these accounts reflects the form, state, or movement of money and is contained in the list, or chart of accounts, that the company uses (usually regulated by relevant government bodies, allowing all users of such reports to understand the presented values equally).
Based on experience — if your accounting doesn’t come down to accounting through a chart of accounts — you won’t be able to build a complete accounting and reporting system in which the obtained figures can be verified.
And if there’s no trust in the obtained figures, then the meaning of such accounting, if it doesn’t disappear completely, is very limited in its usefulness.