Objectives of Financial Accounting
1. The main objective is to maintain a systematic record of a business entity's transactions, evaluate the profit or loss and assets and liabilities position for any year, and communicate these results to the users of financial statements.
2. Preparation and presentation of financial statements is also the main objective of accounting. The financial statements include cash flow statements, balance sheets, and profit and loss accounts.
3. The other important objective is to ascertain financial performance and financial position. This profit of loss is revealed by the preparation of profit&loss account, this is called financial performance. Ascertainment of financial position is done by preparing the balance sheet. Non-Trading organizations prepare an Income and Expenditure account to know the surplus or deficit for any year. A business entity's assets and liabilities position is revealed by preparing a balance sheet.
4. Then to evaluate the profit or loss and assets and liabilities position for any year, and communicate these results to the users of financial statements. Users of financial information include creditors, debtors, management, government, investors.
5. The objective is to prevent and detect errors & frauds as well. This is the other main objective to ensure that every debit is equal to the corresponding credit. To ensure that books of accounts give arithmetic accuracy of books of accounts.
6. The main objective of accounting would also include Decision Making. These are the decisions related to raising the capital for the business projects, knowing the financial performance and taking steps to enhance the financial performance and financial standings.
7. To ensure that financial statements give a true and fair view of the state of affairs, profit and loss, cash flow for the year. This enables the conduct of the statutory audit and tax audit smoothly and fairly. The management has to ensure that financial statements have been prepared by following the Generally Acceptable Accounting Principles (GAAP), relevant accounting standards, relevant laws. This would help the Auditor to give a Clean Opinion in his statutory audit report.
8. To enable the Tax authorities to levy relevant taxes by complying with the tax laws. Management has to ensure that complete books of accounts have been maintained, financial statements have been prepared by complying with the relevant accounting standards and accounting policies.
Conclusion:
Thus now we can see, too, what are the main objectives of accounting? Accounting is the art of recording and reporting financial transactions in the books of accounts using financial statements. The main objective is to maintain a systematic record of business transactions of a business entity and to evaluate the financial performance & position for a year and communicate the results to the users of financial performance
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Hi, Thanks for sharing this informative article regarding accounting services. Bookkeeping and accounting Services are the foundation of financial health. These tasks are responsible for looking after the financial health of your business. You can sustain unexpected situations, make better business decisions, stay financially strong, and maintain compliance with the proper execution of these tasks.
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