Accounting

Accounting can be defined as a systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating financial information. Let us see more about the meaning and roles of accounting in business.


Objective of Accounting

The following are the main objectives of accounting:-

To keep Systematic Records

The main objective of accounting is to keep a systematic record of financial transactions which helps the users to understand the day to day transactions in a systematic manner so as to gain knowledge about overall business.

To Protect Business Properties

Accounting provides protection to business properties from unjustified and unwarranted use. Information about the above matters helps the proprietor in assuring that the funds of the business are not necessarily kept idle or underutilized.

Ascertain Profit

Another objective of accounting is that it helps in ascertaining the net profit earned or loss suffered on account of carrying the business which is done by keeping a proper record of all books of accounts with respect to revenues and expenses of a particular period.


Ascertain the Financial Position

The accounting also helps the businessman to know about his financial position. This objective is served by the Balance Sheet or Position Statement. The Balance Sheet is a statement of assets and liabilities of the business on a particular date. It serves as a tool for ascertaining the financial health of the business.

Facilitate Decision Making

Accounting also helps in the collection, analysis, and reporting of information at the required points of time to the required levels of authority in order to facilitate rational decision-making.

Information System

Another objective of accounting is that it can be defined as accounting functions as an information system for collecting and communicating economic information about the business enterprise. This information helps the management in taking appropriate decisions.



Ascertain the Financial Position

The accounting also helps the businessman to know about his financial position. This objective is served by the Balance Sheet or Position Statement. The Balance Sheet is a statement of assets and liabilities of the business on a particular date. It serves as a tool for ascertaining the financial health of the business.

Facilitate Decision Making

Accounting also helps in the collection, analysis, and reporting of information at the required points of time to the required levels of authority in order to facilitate rational decision-making.

Information System

Another objective of accounting is that it can be defined as accounting functions as an information system for collecting and communicating economic information about the business enterprise. This information helps the management in taking appropriate decisions.

The primary objective of accounting is to provide accurate and useful financial information to stakeholders, including investors, creditors, management, and regulatory bodies. This information is used to make informed decisions about the financial health and performance of an organization. Other objectives of accounting include maintaining records of financial transactions, ensuring compliance with accounting standards and regulations, and facilitating effective financial management and planning.