Concept And Meaning Of Accounting
Accounting may be defined as the systematic recording, summarizing and analyzing of financial transactions and reporting the results. The main purpose of accounting is to show the exact financial condition of the business. Accounting helps to ascertain profit or loss during a specified period. It also helps to have control over the firm’s property. Therefore accounting is the art of recording and classifying business transactions and events in monetary terms. In recent years accounting is defined as the art of communicating financial information about a business entity to external and internal users. External users of accounting information are investors, creditors, consumers, research scholars, government etc. Internal users of accounting information mean owners, management and employees.
Also read: Assumptions of Accounting
Objectives Of Accounting
The main objective of accounting is to provide information about the financial condition of the organisation to internal and external users.
Other objectives of accounting are as follows.
- Accounting helps in making decisions concerning the more rational acquisition of limited resources through better decision choices.
- Accounting helps for efficient use of the available resource through prompt detection of inefficiencies.
- Accounting helps for more equitable distribution of resources.
- Accounting helps to make policy decisions relating to change in the system.
- Accounting helps discharge the social responsibilities of the business and industry.
- Accounting Provides accounting data to the Government for taking decisions on excise duties, sales taxes etc.