Objectives of Accounting
The following are the general objectives of accounting:
- Maintenance of Records of Business Transactions:
- Systematic recording of business transactions is the first step in the process of accounting.
- While recording the information the accounting convention and concepts have to be followed.
- Transactions relating to business have become so important that their recording has become a necessity.
- Moreover, the accounting records is also acts as an evidences.
- Calculations of Profit and Loss:
- To ascertain the net results of business operation (i.e.) Profit /loss incurred during a period.
- A proper record of all incomes and expenditure enables the business to prepare Profit and loss to ascertain the net result of business operation during a particular period.
- Depiction of Financial Position:
A proper record of assets and liability are maintained in order to view the financial position of the business concern.
Assets- Resources owned by business organization.
Liability- Claims against such resources.
- Providing Accounting Information to its users
Accounting information are communicated to other parties apart from owners& proprietor, they are Tax authorities, creditors, customer, employee etc., Communication may be in the form of report, graph, charts etc., to the users.
- Owners- Interested to know the profit, value of assets/liability , Accounting facts and information for filing various returns.
- Management- useful for setting up target for future periods.
- Potential investors- Are in need of detailed information about the progress of the business concern and take decision to invest in a particular business.
- Creditors- Interested in knowing the credit worthiness of the business concern and its ability to repay the loan and interest.
- Employee- Interested in the performances, stability, profitability, distribution of wealth within the business concern.
- Government- Information on the allocation of resources and compliances of regulations
- Competitors: Requires information mainly for strategic purposes