What are the Functions of Accounting?

 Let us know, as to, what are the functions of accounting? and how it helps to know the relevance & functions of accounting. These Accounting Functions are helpful to know the financial performance and financial standings to communicate these results to the users of financial information

What are the Functions 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 to evaluate the financial performance & position for a year and to communicate the results to the users of financial statements

 It is the language of business. It helps to record the business transactions and prepare the financial statements at the end of the year to know financial performance and position. These statements include the income statement, balance sheet, and cash flow statement

The following are the functions of Accounting:

1.The most important  Accounting function is to record the financial transactions in the books of accounts such as journal, ledger, trial balance. 

  Bookkeepers are assigned with the tasks of collecting and producing source documents and recording the business transactions,

2.The most important  Accounting function includes classifying, summarising, interpreting, analysing the financial information 

3. To maintain books of accounts which includes source documents, journal, ledger, subsidiary books. These books of accounts would help to maintain financial information in a systematic manner.

4. Prevention and detection of frauds and errors which is a core vital aspect to ensure that every debit is equal to the corresponding credit. 

  This helps to ensure that books of accounts give a true and fair view of profit & loss, assets & liabilities.

5.To produce the General Purpose Financial Statements such as profit and loss statement, balance sheet income and cash flow statement 

 

     Financial statements are prepared every year-end to know the financial performance and position. These financial statements include profit and loss statement, balance sheet, cash flow statement.

6. The most important  Accounting function includes communicating the financial results to the users of financial information such as creditors, debtors or customers, government, employees, management, tax authorities, investors

7.To produce the Financial information which is used by the management for helpful decision making. Finance and Accounts managers use the financial results and information in making useful decisions.

8.The important Accounting function is planning and performance evaluation. 

   This helps to analyse the financial performance in terms of profitability. This would also help to compare the past and current performance and to make the plans & financial decisions to enhance the performance in future

Conclusion:

 

Thus, now we are able to understand, as to, what are the functions of accounting? and how it helps in predicting the financial performance and position. It also helps to communicate the financial results to the users of information

  Thus it includes recording the financial transactions, producing financial statements, communicating the financial results to the users of financial information, prevention and detection of frauds and errors, planning and performance evaluation, decision making.

Related blogs:

What is Journal? Its features, types, Objectives and uses

What are Ledgers? 

What is Trial Balance?

What are Financial Statements? Its features, types, uses

What is Income Statement (Profit and loss a/c)?

What is Balance Sheet (Position Statement)?

What is Cash Flow Statement?

What is Bookkeeping? Its features, objectives, uses?

What are Subsidiary Books? Its features, types, objectives, uses

What is Single Entry System? Its features, types, objectives, uses

What is Double Entry System? Its features, objectives, uses