The Need for Accounting
What is Accounting?
Accounting is the process of gathering and analyzing data about a company's financial activities. Accountants compute income, liabilities, owner's equity, assets, and cash flow by analyzing company activities. As an accountant, you should be familiar with the fundamental concepts and principles of financial management. Take an accounting course, acquire an accounting book, take notes as you read, understand the broad concepts and principles of accounting, comprehend the basic equations, and master the common bookkeeping methods to learn accounting step by step. Accounting allows you to diversify your company's offerings. Other business-related practical skills could be studied in order to change careers and live a more independent life. Accounting should be built in such a way that it meets these new goals as well. When designing an accounting system, keep in mind the management information system.
8 MAJOR NEED AND OBJECTIVES OF ACCOUNTING
Accounting should be built in such a way that it meets these new goals as well. While designing the accounting system, the management information system should be incorporated.
As a result, the Need and Goals of Accounting are as follows:
1. Systematic recording of transactions.
2. Profit and Loss Determination.
3. Tax Return Preparation.
4. Providing the financial institution with the necessary information.
5. Financial Position Representation.
6. Effective Business Control.
7. Information Dissemination to Interested Parties.
1. Systematic recording of transactions
Accounting's first purpose is to classify and record company transactions and events inaccurate records to show assets, liabilities, capital, and profit and loss.
2. Profit and Loss Determination
The purpose of all business interactions is to make money. Every businessperson wants to know how transactions have turned out over a given length of time. For these, we build a profit and loss account. As a result, the difference between revenue and expenditure shows the profit for the period; however, if expenditure exceeds income, a loss occurs.
3.Tax Return Preparation
One of the main goals of accounting is to give information for the following tax returns:
- Income tax
- Sales tax
- Property tax
- Levy on wealth
- Tax on purchases
- Value-added tax (VAT) is a tax that is levied on
- Dividend withholding tax
- Tariffs on imports and exports
- Export incentives, and so on
As a result, tax assessments are based on vouchers and financial statement.
4.Providing the financial institution with the necessary information
If a businessperson needs money from a financial institution, he or she must provide far more information about the business.
5.Financial Position Representation
Every entrepreneur wants to know where his money is going. The balance sheet is a description of a firm's assets and liabilities at a certain point in time that helps determine the financial health of the company.
6.Effective Business Control
I want to show you how to maintain excellent corporate control. Accounting gives the most up-to-date information on a company's production costs, sales, expenses, profit, and loss. It is possible to compare budgeted and actual data, as well as data from other competitive firms. In general, this procedure identifies variations in business activities, allowing for the removal of various reformative actions and effective control over the business.
7.Information Dissemination to Interested Parties
Accounting's goal is to offer information to creditors, employees, current and prospective investors, researchers, and the general public. Employees' interests are in their earnings, bonuses, and permanence, whereas loan givers and investors are interested in the safety of their investments and in earning interest and dividends.
Establishment of the budget and standard for:
- Variance analysis, accounting information should be accessible.
- Making the decisions.
As a result, if the accounts are computerized, accurate data will be available at the earliest possible time for corrective action. Fund Flow Statements, Cash Flow Statements, Inflation Accounting, and Human Resources Accounting are all commonly published by businesses.