Accounting can be defined as the systematic recording, reporting of financial transactions of a business and a person who manages the accounts of any company or financial institution is called an accountant.
The main purpose of accounting is to allow a company to analyze its statistical data’s and prepare its financial accounts.
There are certain objectives of accounting. They are the following:
I. To Maintain Systematic Records:
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Accounting keeps the systematic records of all the financial transactions of a company or any financial institution. Proper decision making and analysis of profits are impossible if records are not maintained systematically in a company. Even tracking previous transactions or remembering the minute detail of a transaction would be impossible without maintaining these records.
II. Estimating Profit and Loss:
It is impossible to estimate the profit and loss of a company and even a household if proper accountancy records are not made. Moreover without the proper estimation of profit and loss it is impossible to make any further financial decisions for a company.
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III. Balance Sheet:
It is easy to understand the financial position of a company when a proper balance sheet is maintained by the accountant or any other individual of a company. It is difficult to set future targets without the estimation of the financial position of a company.
IV. Facilitating Rational Decision Making:
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As a result of accounting in any particular company, it is easy for a company to make rational decisions in matters relating to the investment of capital, raising the salaries and providing incentives to the working staff.
V. Striking a Balance:
In order to maintain the balance between the input and output of the cash flow accounting is extremely essential to maintain the financial accounts of a company.
VI. True Financial Statement:
In order to gain a proper understanding of the financial status and position of a company auditing is essential. As a result, the company can understand whether or not it is headed to the right direction.
VII. Prevention and Detection of Errors:
When systematic financial accounts are maintained, a proper trial and error is conducted as a result of which no errors are committed and even the future errors are corrected.
VIII. Prevention and Detection of Fraud:
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As a result of maintenance of proper accounts, it is impossible for any member of the company to conduct any financial activity that will fill his own pocket and empty the company. As a result of proper maintenance of accounts, the fraud ratio of a company drops down to zero.
IX. Cost and Property Audit:
Proper cost and property audit is conducted by means of accounting as a result of which proper estimation is made benefiting the company to a large extent.
X. Management, Tax and Social Audit:
Apart from cost and property audit, management tax and social auditing is also conducted by the means of accounting.
In a crux, it is impossible to maintain a company without the help of an accountant in general.