Objectives Of Accounting

The objectives of accounting can be given as follows:

1. Systematic recording of transactions – The basic objective of accounting is to systematically record the financial aspects of business transactions i.e., book-keeping. These recorded transactions are later on classified and summarized logically for the preparation of financial statements and for their analysis and interpretation.
2. Ascertainment of results of above-recorded transactions – Accountant prepares profit and loss account to know the results of business operations for a particular period of time. If revenue exceeds expenses then it is said that the business is running profitably but if expenses exceed revenue then it can be said that the business is running under loss. The profit and loss account helps the management and different stakeholders in taking rational decisions. For example, if the business is not proved to be remunerative or profitable, the cause of such a state of affairs can be investigated by the management for taking remedial steps.
3. Ascertainment of the financial position of the business – Businessman is not only interested in knowing the results of the business in terms of profits or loss for a particular period but is also anxious to know that what he owes (liability) to the outsiders and what he owns (assets) on a certain date. To know this, accountants prepare a financial position statement popularly known as the Balance Sheet. The balance sheet is a statement of assets and liabilities of the business at a particular point in time and helps in ascertaining the financial health of the business.
4. Providing information to the users for rational decision-making – Accounting as a ‘language of business’ communicates the financial results of an enterprise to various stakeholders by means of financial statements. Accounting aims to meet the information needs of the decision-makers and helps them in rational decision-making.
5. To know the solvency position – By preparing the balance sheet, management not only reveals what is owned and owed by the enterprise, but also it gives the information regarding concern’s ability to meet its liabilities in the short-run (liquidity position) and also in the long-run (solvency position) as and when they fall due.