Objectives of Accounting

In earlier post we came across what is accounting and basic terminology used in accounting.  Accounting helps us to produce an accurate financial status of firm with all essential aspects. Here we will see the Main objectives of accounting.

Accounting:

                  It is defined as the task of systematically recording, reporting and achieving Financial position of the business. The accounting department analyze all the statistical data for preparation of Financial accounts.

Objectives of Accounting:

Accounting has a lot of clearly defined objectives to work with. The objectives may also differ based on business we belong to. Now we will see the objectives of accounting ..

Record Keeping: The basic objective of accounting is to record transactions in systematic manner. This is most important objective because systematic record leads to analyze accurate financial statement or position of Business.

Analyzing and ascertaining the financial results: Business is run to earn profits. Whether the business earned profit or incurred loss is ascertained by accounting by preparing Profit & Loss Account or Income Statement. A comparison of income and expenditure gives either profit or loss.

Analysis of the financial status of affairs: A businessman is also interested in ascertaining his financial position at the end of a given period. For this purpose, a position statement called Balance Sheet is prepared in which assets and liabilities are shown.

Decision Making: Accounting has yet another wider objective of helping the managers and business owners in decision making. Systematic accounting will be an essential factor for making business decisions and set realistic goals for the targets and plans for future growth.

Detection and prevention of frauds: It is necessary to detect and prevent fraud and errors, mismanagement and wastage of the finance. Systematic recording helps in the easy detection and rectification of frauds, errors and inefficiencies, if any.

Communicating accounting information to various users: The important step in the accounting process is to communicate financial and accounting information to various users including both internal and external users like owners, management, government, labour, tax authorities, etc.