Purpose and Functions of Accounting (Grade A+)

Summary:

Accounting is a crucial function in businesses that involve measuring, processing, and sharing financial information. It encompasses activities such as recording transactions, summarizing and analyzing data, and reporting financial statements to relevant entities. There are different types of accounting, including tax accounting, financial accounting, management accounting, cost accounting, forensic accounting, governmental accounting, and international accounting. Each type serves a specific purpose and is tailored to meet different accounting needs. Tax accounting focuses on compliance with tax laws and developing tax strategies, while financial accounting involves tracking and reporting financial transactions and creating financial statements for external use. Management accounting provides internal reports to assist in decision-making, while cost accounting focuses on analyzing the cost structure of a business. Forensic accounting involves investigating financial wrongdoing and providing litigation support if necessary. Governmental accounting follows specific standards for budgeting and managing public finances, and international accounting helps companies navigate regional and international regulations. Auditing, both internal and external, plays a crucial role in ensuring compliance with accounting principles and detecting financial irregularities. Accountants have various responsibilities, including record-keeping, financial statement preparation, and generating reports for management. The accounting journal is a comprehensive record of a business’s financial transactions. It is important to note that an external agency authors the content presented and does not necessarily represent the views of the Economic Times. Readers are encouraged to verify and validate the information provided.

Excerpt:

Purpose and Functions of Accounting

BUSINESS MODULE – 1

Accounting

Accounting, often called “accounting,” is the process of measuring, processing, and sharing financial and other information about businesses and corporations.

WHAT IS ACCOUNTING

Accounting is the process of recording financial transactions pertaining to a business. The accounting process includes summarizing, analyzing, and reporting these transactions to oversight agencies, regulators, and tax collection entities. The financial statements used in accounting are a concise summary of financial transactions over an accounting period, summarizing a company’s operations, financial position, and Cash Flows.