Objectives of Accounting
The main objectives of accounting are:
To maintain a systematic record of business transactions
- Accounting is used to maintain a systematic record of all the financial transactions in a book of accounts.
- For this, all the transactions are recorded in chronological order in Journal and then posted to principle book i.e. Ledger.
To ascertain profit and loss
- Every businessman is keen to know the net results of business operations periodically.
- To check whether the business has earned profits or incurred losses, we prepare a “Profit & Loss Account”.
To determine the financial position
- Another important objective is to determine the financial position of the business to check the value of assets and liabilities.
- For this purpose, we prepare a “Balance Sheet”.
To provide information to various users
- Providing information to the various interested parties or stakeholders is one of the most important objectives of accounting.
- It helps them in making good financial decisions.
To assist the management
- By analysing financial data and providing interpretations in the form of reports, accounting assists management in handling business operations effectively.
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