- Maintenance of Records of Business Transactions: No individual can remember every detail regarding the sales, purchases, payments, revenue, receipts, expenses, etc., of an organization. Therefore, a proper, accurate, and regular, systematic recording of business transactions is essential for every organization. Accounting helps an organization in recording and maintaining the records of business transactions.
- Depiction of Financial Position: Another objective of accounting is the ascertainment of an organization’s financial position in the form of its liabilities and assets at the end of each financial year. An organization can depict the financial position for the accounting year with the help of financial statements.
- Calculation of Profit and Loss: The central aim of every organization is to earn and maximize profit. For this, the business owners might need an idea of the net results based on the organizational operations. Therefore, accounting aims at ascertaining the loss sustained and profit earned by an organization during the financial year.
- Providing Accounting Information to its Users: The Accounting information generated by an organization in the form of financial statements, reports, charts, etc., for the accounting year is used by different external and internal users. Accounting provides relevant information about the organization to these users. Some of the users of accounting information are management, employees, investors, creditors, banks, financial institutions. etc.
Introduction to Accounting