Objective of Accounting.

Objective of Accounting:-

 The objectives of accounting can be given as follows:

1. Systematic recording of transactions – Basic objective of accounting is to systematically record the

 aspects of business transactions i.e. book-keeping. These recorded transactions are later on 

classi ed and summarized logically for the preparation of nancial statements and for their analysis and 
interpretation.

2. Ascertainment of results of above recorded transactions – Accountant prepares pro t and loss 
account to know the results of business operations for a particular period of time. If revenue exceed 
expenses then it is said that business is running pro tably but if expenses exceed revenue then it 
can be said that business is running under loss. The pro t and loss account helps the management 
and di erent stakeholders in taking rational decisions. For example, if business is not proved to be 
remunerative or pro table, the cause of such a state of a air can be investigated by the management 
for taking remedial steps. 

3. Ascertainment of the financial position of the business – Businessman is not only interested in 
knowing the results of the business in terms of pro ts or loss for a particular period but is also anxious 
to know that what he owes (liability) to the outsiders and what he owns (assets) on a certain date. To 
know this, accountant prepares a nancial position statement popularly known as Balance Sheet. The 
balance sheet is a statement of assets and liabilities of the business at a particular point of time and 
helps in ascertaining the nancial health of the business.

4. Providing information to the users for rational decision-making – Accounting as a ‘language of 
business’ communicates the nancial results of an enterprise to various stakeholders by means of 
nancial statements. Accounting aims to meet the information needs of the decision-makers and helps 
them in rational decision-making.

5. To know the solvency position – By preparing the balance sheet, management not only reveals what 
is owned and owed by the enterprise, but also it gives the information regarding concern’s ability to 
meet its liabilities in the short run (liquidity position) and also in the long-run (solvency position) as and 
when they fall due.