Accounting is a very vital subject in the commerce field. For a better understanding of the objectives and the functions of accounting, first of all, it is very important to know about the accounting beforehand. The objectives and the function of accounting will be later discussed in depth.
Accounting is basically the systematic process of handling all the financial transactions and business records. In other words, Accounting is a bookkeeping process that records transactions, keeps financial records, performs auditing, etc. It is a platform that helps through many processes, for example, identifying, recording, measuring and provides other financial information.
Accounting is a very important procedure and holds great importance in people’s lives. Accounting aids to a lot of financial procedures and analytics taking place every day. There are specific people for doing this job and they are known as accountants. As said earlier, accounting is a very important process and in addition, holds a lot of objectives and functions.
Functions of Accounting
To move ahead to the functions of accounting, first of all, it is very important to know about the role of accounting. The basic role of accounting is to provide relevant financial information to the businessmen and the stakeholders. Furthermore, facilitating the decision making processes and keeping them updated. There are two types of functions of accounting, first, historical functioning and second, managerial functionals.
Browse more Topics under Meaning And Scope Of Accounting
- Meaning of Accounting
- Sub-fields of Accounting
- Limitations of Accounting
- Functions of an Accountant
The historical functioning of accounting involves keeping accurate records of all the past transactions made in the business. This type of functioning of accounting includes:
- Recording the financial transactions and maintain a journal to keep them all.
- It is important to classify and separate the records and the ledger.
- Preparation of brief summary takes place for quick reviews.
- This type of accounting gives the net result other than just keeping the records.
- The preparation of the balance sheet takes place to determine the financial position of the business.
- The analyzed data and records are then used for other purposes.
- The last step is to communicate the obtained financial information to the interested sectors, for instance, owners, suppliers, government, researchers, etc.
In an organization, the management committee looks for all kinds of decision making. To ensure that the decisions are smooth and beneficial for everyone, they do an evaluation of the past records provided by accounting. These are managerial functions. The five managerial functions of accounting are:
- Formation of plans in addition to controlling the financial policies.
- Besides that, a budget is prepared to estimate the total expenditure for future activities.
- Also, cost control is made possible by comparing the cost with the efficiency of the work.
- The accounting also provides the necessary information during the evaluation of employee’s performance.
- To check for fraud and errors is what the workability of the whole procedure depends on.
Objectives of Accounting
The functions of accounting facilitate the objectives of accounting. there are many objectives of accounting. For instance,
- Accounting facilitates the systematic management of the records of the transaction and other financial data.
- It gives an idea about the chances of profitability or failure or losses.
- The process assists the management by helping them to make the best decisions. besides that, accounting ascertains the financial position of an organization.
- It also helps in the evaluation of the employee and their working efficiency, in addition, communicating and spreading the accounting information to the user.
- Accounting contributes the biggest to any organization by preventing fraud and prevents profit risks.
Solved Questions for You
Q: What is accounting?
Ans: Accounting is a bookkeeping process that records transactions, keeps financial records, performs auditing. It is a platform that helps through many processes, for example, identifying, recording, measuring and provides other financial information.
Q: What are the objectives and functions of accounting?
Ans: There are two main functions of accounting, historic and managerial functions and the objective of accounting is to help the company maintain user-friendly relations and also helps in avoiding fraud. Overall the main objective and function are to support the decision-making process so that the employees and also other users can have many advantages.