Purpose Of Accounting, You Must Know About Main Goals of Accounting: Hey guys, today I am sharing some useful information about acounting. How accounting is important for our business and many more things, may this isnformation helps you.
Purpose Of Accounting, You Must Know About Main Goals of Accounting
Transaction Identification And Recording
Accounting’s primary goal is to identify financial transactions and record them systematically of book accounts. As a consequence, the true nature of each transaction is known without much mental effort.
With this goal in mind, transactions are initially recorded in a general and a special journal, and later on, various accounts are permanently maintained in the ledger.
Determination Of Outcomes
Hence every business interests in knowing its operating results at the end of a specific period.
Hence the aggregate of profit or loss for a specific period of a business concern determine by preparing an income statement using revenue ledger account balances.
A non-trading company revenue surplus or deficit for a specific period also be determine by preparing an income and expenditure account or statement.
Investigation Of Financial Matters
Hence another important objective of accounting is the determination of debts-liabilities, property, and assets, i.e. the total financial affairs of an organisation at a specific date.
A balance sheet use to determine the financial affairs of a company at a specific date.
The balance sheet is a statement of a company’s assets and liabilities as of a specific date.
Keeping Cash Records
The cash book is an important book in the books of accounts.
This book keeps track of cash receipts and payments. This book contains information on a variety of daily cash receipts, payments, cash in hand, and cash at the bank.
By keeping a cash book in a scientific and accurate manner, fraud, forgery, and misappropriation of funds reduces.
Asset And Liability Management
A businessman must acquire various assets in order to run a successful business, such as land, a building, machinery, and so on.
Along with the acquisition of assets, he must deal with various debts and liabilities like accounts payable, notes payable, loans, bank overdrafts, and many more.
Therefore the real position of these debts-liabilities, property, and assets can be determined by keeping proper accounts.
A businessman can take the necessary steps to control the amount of assets that decrease and liabilities that increase.
Maintaining Control Over Money Defalcation And Cost
Accounting’s main objectives are also the prevention of money defalcation through fraud and forgery, as well as the control of business costs.
Accounts that keep scientifically make it easier to prevent money laundering and cost control.
Supplying Economic Data
Another noble goal of accounting is to provide all economic information to the parties involved in a timely manner by preparing financial statements and reports, among other things.
Assisting With Taxation
Hence accounts prepare on the basis of accept accounting principles are consider reliable by income tax and VAT authorities for easy tax and VAT determination and settlement.
Policy Formulation And Evaluation
Accounting’s goal is to assist management in determining and evaluating management policies. In order to successfully run the business by providing necessary information, interpreting, and analysing financial statements.
Accounts’ Arithmetic Accuracy Is Tested | Purpose Of Accounting
One of the main goals of scientific accounting methods is to ensure that proper records should keep. A trial balance use for ensuring the arithmetic accuracy of accounts kept in the ledger.
Hence the agreement of a trial balance proves the arithmetic accuracy of accounts.
The benefit of taking loans is that, due to a lack of capital, borrowing capital from outsiders is deem necessary to run a business.