Meaning of Accounting
Accounting, as an information systems is the process of identifying, measuring, and communication the economic information of n organization to it's users who need the information for decision making. It identifies transaction and events of a specific entity. A transaction is an exchange in which each participant receives or sacrifices value. An event is a happening of consequence to an entity. An entity means an economic unit that performs economic activities.
Definition of Accounting
American institute of certified public accountants which defines accounting as " the art of recording, classifying and summarizing manner and in terms of money, transaction and events, which are, in part at least of financial character and interpreting the results there of"
Objectives of accounting
Objectives of accounting May differ from business to business depending upon their specific requirements. However, the following are the general objesctives of accounting.
1. To keeping systematic record
It is very difficult to remember all the business transactions that take place. Accounting serves this purpose of record keeping by prompty recording all business transactions in the books of account
2.to ascertain the results of the operation
Accounting helps in ascertaining result I e, profit earned or loss suffered in business during a particular period. For this purpose, a business entity prepares either a trading and profit and loss account or an income and expenditure account which shows the profit or loss of the business by matching the items or revenue and expenditure of the some period.
3.to ascertain the financial position of the business
A businessman must know his financial position i.e. availability of cash, position of assets and liabilities etc. This helps the business to know his financial strength financial statement are barometers of health of a business entity.
4.to portray the liquidity position
Financial reporting should provide information about how an Enterprise obtains and spends cash, about it borrowing and repayment of borrowing about it's capital transactions, cash dividends and other distributions of resources by the Enterprise to owners and about other factors that may affect and Enterprise's liquidity and solvency.
5.to protect business properties
Accounting provided up to date information about the various assets that the firm possesses and the liabilities the firm owes, so that nobody can claim a payment which is not due to him.
6. To facilitate rational decision making
Accounting records and financial statement provide financial information which help the business in making rational decisions about the steps to be taken in respect of various aspects of business.
7. To satisty the requirements of law
Entities such as companies, societies, public trusts are compulsorily required to maintain accounting as per the law governing their operations such as the companies act, societies act, and public trust act etc. Maintenance of accounts is also compulsory under the the sales tax act and income tax act....
Objectives of accounting
Objectives of accounting May differ from business to business depending upon their specific requirements. However, the following are the general objesctives of accounting.
1. To keeping systematic record
It is very difficult to remember all the business transactions that take place. Accounting serves this purpose of record keeping by prompty recording all business transactions in the books of account
2.to ascertain the results of the operation
Accounting helps in ascertaining result I e, profit earned or loss suffered in business during a particular period. For this purpose, a business entity prepares either a trading and profit and loss account or an income and expenditure account which shows the profit or loss of the business by matching the items or revenue and expenditure of the some period.
3.to ascertain the financial position of the business
A businessman must know his financial position i.e. availability of cash, position of assets and liabilities etc. This helps the business to know his financial strength financial statement are barometers of health of a business entity.
4.to portray the liquidity position
Financial reporting should provide information about how an Enterprise obtains and spends cash, about it borrowing and repayment of borrowing about it's capital transactions, cash dividends and other distributions of resources by the Enterprise to owners and about other factors that may affect and Enterprise's liquidity and solvency.
5.to protect business properties
Accounting provided up to date information about the various assets that the firm possesses and the liabilities the firm owes, so that nobody can claim a payment which is not due to him.
6. To facilitate rational decision making
Accounting records and financial statement provide financial information which help the business in making rational decisions about the steps to be taken in respect of various aspects of business.
7. To satisty the requirements of law
Entities such as companies, societies, public trusts are compulsorily required to maintain accounting as per the law governing their operations such as the companies act, societies act, and public trust act etc. Maintenance of accounts is also compulsory under the the sales tax act and income tax act....
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