Explain the various functions of accounting.
Answers
The following are the major functions of accounting:
(a) Keeping Systematic Records:As a language of business, accounting is to report the results of most business events. Hence, its main function is to keep a systematic record of these events. This function embraces recording transactions in journal and subsidiary books like cashbook, sales book etc., posting them to ledger accounts and ultimately preparing the financial statements [final accounts].
(b) Communicating the Results:The second main function of accounting is to communicate the financial facts of the enterprise to the various interested parties like owners, investors, creditors, employees, government, and research scholars, etc.
The purpose of this function is to enable these parties to have better understanding of the business and take sound and realistic economic decisions.
(c) Meeting the Legal Requirements:Accounting aims at fulfilling the legal requirements, especially of the tax authorities and regulators of the business. It discharges this function in accordance with certain fundamental truths and uniform enforcement of generally accepted accounting principles.
(d) Protecting the Properties of the Business:Accounting helps protecting the property of the business.
(e) Planning and Controlling the Business Activities:Accounting also helps planning future activities of an enterprise and controlling its day-to-day operations. This function is done mainly to promote maximum operational efficiency.
Answer:
what is accounting
The act of recording events in numbers to achieve a specific objective is called accounting.
Explanation:
Accounting functions
1. Recordative Function
This is the most basic function of accounting. Under this work, tasks like recording listed in the accounting books of the business, classifying them, and preparing accounts from them are included.
2. Communicating Function
Accounting is called the language of business. Just as the main purpose of language is to act as a means of communication, in the same way the financial position and other information of the accounting business is to reach all the people for whom it is necessary.
3. Meeting Legal Needs
Various types of details are collected by various laws like – the Companies Act, Income Tax Act, etc. Like – Annual Accounts, Income returns, etc. All these can be accumulated if the accounting is kept properly.
4. Protecting Business Assets
One important function of accounting is to protect the assets of the business. This is possible only when records of various Assets are kept.
5. Facilitating Decision Making
Accounting provides important data which facilitates decision-making.
Accounting objectives
The main objectives of accounting are:
- The first objective of accounting is to keep a complete account of all business transactions. There is no possibility of mistakes by recording events properly.
- The second objective of accounting is to find out the profit and loss of a fixed period.
- One of the objectives of accounting is to obtain information about the financial status of the organization.
- One purpose of accounting is to provide financial information so that managers can find the right way to grow the company.
- Many people are benefited from business, such as employees, managers, creditors,s, etc. One of the objectives of accounting is also to provide information related to various people having profit in the business.
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