Objective of financial accounting
Financial statements display the income and expenditure for the company and a summary of the assets, liabilities, and shareholders' or owners' equity of the company on the date to which the accounts were prepared. In cost accounting, classification is basically on the basis of functions, activities, products, process and on internal planning and control and information needs of the organization.
Companies report financial results on a quarterly or annual basis to satisfy this objective.
10 objectives of financial accounting
Profit is a measure of the performance of the organisation. Objectives of Accounting: The following are the main objectives of accounting: 1. Objectives of Financial Accounting Role of Accounting Accounting is not an end in itself; it is a means to an end. Even tracking previous transactions or remembering the minute detail of a transaction would be impossible without maintaining these records. Objectives of Accounting The basic aim of accounting is to give information to the interested parties to enable them all to make important business decisions. Publicly traded companies must use the accrual accounting method which is standardized under generally accepted accounting principles GAAP. To know this, accountant prepares a financial position statement of assets and liabilities of the business at a particular point of time and helps in ascertaining the financial health of the business. The objective of financial accounting is to provide information to the end user, but the conceptual framework, or Statements of Financial Accounting Concepts SFAC , tells us what qualities that information must have. The actual position of these debts-liabilities, property, and assets can be ascertained through the proper keeping of accounts. Information about the performance and the earning power of the business enterprise. Much like signs in math: two positive numbers are added and two negative numbers are also added.
The amount of profit or loss for a particular period of a business concern can be ascertained by preparing an income statement with the help of ledger account balances of revenue nature. Reporting Past Performance And Future Prospect The shareholders of the firm want to ensure security and growth in the value of their investment.
These recorded transactions are later on classified and summarized logically for the preparation of financial statements and for their analysis and interpretation.
Even the most intelligent personnel cannot accurately recollect what he might have come across in the daily operations.
Functions of financial accounting
It shows the assets owned by an organisation and depicts the liabilities against the assets. Reliable information is able to be verified, is free of bias and is not misleading. Keeping accounts of cash Cash book is a prominent book of the books of accounts. Proper decision making and analysis of profits are impossible if records are not maintained systematically in a company. The financial statements also provide information for all types of investors to prepare analysis using trends, ratios, and industry comparisons. It is a means to facilitate the dissemination of information among different user groups. The balance sheet is the statement of assets and liabilities of concern at a particular date. If expenses exceed revenue then it is said that the business is running under loss. Business ownership can be in the form of a sole proprietorship , partnership , or a corporation. On the other hand, the government or other authorities may also ask about the financial position of business concern for various reasons. Companies report financial results on a quarterly or annual basis to satisfy this objective. Versus cost accounting[ edit ] See also: Cost accounting Financial accounting aims at finding out results of accounting year in the form of Profit and Loss Account and Balance Sheet. The objective of financial accounting is to provide information to the end user, but the conceptual framework, or Statements of Financial Accounting Concepts SFAC , tells us what qualities that information must have. In a crux, it is impossible to maintain a company without the help of an accountant in general.
The concept of retained earnings means profits of previous years that are accumulated till current period. It shows the assets owned by an organisation and depicts the liabilities against the assets. Objectives of Financial Accounting Role of Accounting Accounting is not an end in itself; it is a means to an end.
Cost Accounting is an internal reporting system for an organisation's own management for decision making. This is an example of the primary quality of reliability taking a front seat to the secondary quality of consistency.
Management, Tax and Social Audit: Apart from cost and property audit, management tax and social auditing is also conducted by the means of accounting.
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