Purpose of Accounting

Purpose of Accounting

Introduction

Accounting processes perform a primary role in making strategic decision what helps in influencing both business and non-business. There are many consequences of making this decision on production, sales and employees. It also helps to get attractions of shareholders. According to the Chartered Institute of Management Accountants (CIMA), the main aim of accounting is to provide financial information to users of such information. Accounting is a very essential discipline for keeping track of measureable factors for a business or individual. It helps to keep the track of cash flow in an organization. It also helps to understand and figure out the progress of the business. There are many purpose of accounting.

Record Transactions

One of the main purposes of accounting is keep record of every transaction. There are many reasons why recording transactions is so important.

* By keeping close track of all the transactions it will help to be ensured about where all the money is coming from and it's going to.

* Helps to figure out which things costing those most and helps to reduce it.

* There are many people who spend money without knowing how much it is going to cost them and that is why they cannot stick to their budget. Keeping records helps to overcome this major problem.

Monitor activity

Keep track of every movement of the business is also can be called business activity. It is one of the purposes of accounting.

Monitoring every business activity helps a business to provide real time information about the status and results of various operations, processes, and transactions. The main benefits of it are to enable an enterprise to make better informed business decision, quickly address problem areas, and re-position organizations to take full advantage of evolving opportunities.

Control

If the organization does not have control over the business it will go through losses. It is very crucial that one have the control over his business. If all the transactions are being recorded properly and maintained, all the business activities are very closely monitored, it will be easy to keep balance in cash flow. Thus allows a business to know if it's costing more than income and can take necessary steps to solve that problem. It also gives various choices e.g. the owner could reduce the costs or raise the prices up etc. To have complete control over the business so that owners could make profits out of it and can expand it they have to keep account of every movement and activity the organization make.

Management of the business

Accounting