Objectives of Accounting:
The following are main objectives of accounting:
1:To keep systematic records:
Accounting is maintained to keep a systematic record of financial transactions.In the absence of accounting there would have been terrific burden on human memory,which in most cases would have been impossible to bear.
2:To protect Business Properties: Accounting provides protection to business properties(assets) from unjustified and unwarranted use.This is possible when accounting department provided supplying the following information to the manager Or proprietor:
i:The amount of the proprietor's fund invested in the business?
ii:How much have to pay to others?
iii:How much has to recover from others?
iv:how much prepaid or un-expired expenses?
v:How much advance or unearned income?
vi:How much amount are in the form of :
a:Cash in hand
b:Cash at Bank
c:Stock of Raw materials
d:Works-in Progress and finished goods?
e:Fixed assets or non current assets
above information helps the proprietor in assuring that the funds of the business are not unnecessarily kept idle or undertilized.
3:To asertain the opertional profit or loss:
Accounting helps in ascertaining the net profit earned or loss suffered on account of carrying the business.keeping a proper record of revenues and expenses of a particular period does this.The profit and loss Account is prepared at te end of a period and if the amount of revenue for the period is more than the expenditure incurred in earning that revenue,there is profit.in Case the expenditure exceeds the revenue,there is loss.Income summary or profit and loss account will help the management,investors,creditors,etc.in knowing weather the business proved to be remunerative or not.In case it has not proved to remunerative or profitable ,the cause of such will be investigated and necessary remedial steps will be taken.
4:To ascertain the financial positionof the Business:
The Profit and loss account gives the amount of profit or loss made bythe business during the particular period.
However,it is enough.The Businessman must know about his financial position
i-e where he stands:What he owes and whathe ownes? The Balance sheet or position statement serves this objectives.
The Balance sheet is a statement of assets and liablities of the business on a particular date.
it serves as barometer for ascertaining the financial haelth of business.
5:To Facilitate rational decesion-making:
Comuterized accounting has taken upon itself the tasks of collection,analysis and reporting of information at the required
points of time to the required levels of authority in order to facilitate rational decesion making.
The American accounting Association has also stressed this point while defining the term "Accounting" When it says that
accounting is "the process of identifying,measuring and communicating economic information to permit informed judgments and decesions by users of the information ". Of course,this is by no means an easy task.However,the accounting bodies all overthe world and particularly the international Accounting standards committee,have been trying to grapple with this problem and have archived suceess in laaying down some basic postulates on the basis of which the accounting statements have to be prepared.
The following are main objectives of accounting:
1:To keep systematic records:
Accounting is maintained to keep a systematic record of financial transactions.In the absence of accounting there would have been terrific burden on human memory,which in most cases would have been impossible to bear.
2:To protect Business Properties: Accounting provides protection to business properties(assets) from unjustified and unwarranted use.This is possible when accounting department provided supplying the following information to the manager Or proprietor:
i:The amount of the proprietor's fund invested in the business?
ii:How much have to pay to others?
iii:How much has to recover from others?
iv:how much prepaid or un-expired expenses?
v:How much advance or unearned income?
vi:How much amount are in the form of :
a:Cash in hand
b:Cash at Bank
c:Stock of Raw materials
d:Works-in Progress and finished goods?
e:Fixed assets or non current assets
above information helps the proprietor in assuring that the funds of the business are not unnecessarily kept idle or undertilized.
3:To asertain the opertional profit or loss:
Accounting helps in ascertaining the net profit earned or loss suffered on account of carrying the business.keeping a proper record of revenues and expenses of a particular period does this.The profit and loss Account is prepared at te end of a period and if the amount of revenue for the period is more than the expenditure incurred in earning that revenue,there is profit.in Case the expenditure exceeds the revenue,there is loss.Income summary or profit and loss account will help the management,investors,creditors,etc.in knowing weather the business proved to be remunerative or not.In case it has not proved to remunerative or profitable ,the cause of such will be investigated and necessary remedial steps will be taken.
4:To ascertain the financial positionof the Business:
The Profit and loss account gives the amount of profit or loss made bythe business during the particular period.
However,it is enough.The Businessman must know about his financial position
i-e where he stands:What he owes and whathe ownes? The Balance sheet or position statement serves this objectives.
The Balance sheet is a statement of assets and liablities of the business on a particular date.
it serves as barometer for ascertaining the financial haelth of business.
5:To Facilitate rational decesion-making:
Comuterized accounting has taken upon itself the tasks of collection,analysis and reporting of information at the required
points of time to the required levels of authority in order to facilitate rational decesion making.
The American accounting Association has also stressed this point while defining the term "Accounting" When it says that
accounting is "the process of identifying,measuring and communicating economic information to permit informed judgments and decesions by users of the information ". Of course,this is by no means an easy task.However,the accounting bodies all overthe world and particularly the international Accounting standards committee,have been trying to grapple with this problem and have archived suceess in laaying down some basic postulates on the basis of which the accounting statements have to be prepared.
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