Functions of Accounting:
Learning Objectives:
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What are the important
functions of accounting.
Record Keeping Function:
The primary function of
accounting is to keep a systematic record of financial transaction -
journalisation, posting and preparation of final statements. The purpose of
this function is to report regularly to the interested parties by means of
financial statements.
Protect Business Property:
The second function of
accounting is to protect the property of business from unjustified and
unwanted use. The accountant thus has to design such a system of accounting
which protect its assets from an unjustified and unwanted use.
Legal Requirement Function:
The third function of
accounting is to devise such a system as will meet the legal requirements.
Under the provision of law, a business man has to file various statements
e.g., income tax returns, returns for sales tax purpose etc. Accounting
system aims at fulfilling the requirements of law. Accounting is a base,
with the help of which various returns, documents, statements etc., are
prepared.
Communicating the Results:
Accounting is the language of
business. Various transactions are communicated through accounting. There
are many parties - owners, creditors, government, employees etc, who are
interested in knowing the results of the firm. The fourth function of
accounting is to communicate the results to interested parties. The
accounting shows a real and true position of the firm of the business.
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