Livestock Economics, Marketing and Business Management

AIM OF ACCOUNTING

• The following are the main objectives of accounting:

To keep systematic records

• Accounting is done to keep a systematic record of financial transactions.

To protect business properties

• Accounting provides protection to business properties from unjustified and unwarranted use.

To ascertain the operational profit or loss

• Accounting helps in ascertaining the net profit earned or loss suffered on account of carrying the business.
• This is done by keeping a proper record of revenues and expenses of a particular period.
• The profit and loss account is prepared at the end of a period and if the amount of revenue for the period is more than the expenses incurred in earning that revenue, then it is said to be a profit. In case the expenditure exceeds the revenue, there is said to be a loss.
• Profit and loss account will help the management, investors, creditors, etc. in knowing whether running the business is remunerative or not.

To ascertain the financial position of business

• The profit and loss account gives the amount of profit or loss made by the business during a particular period. However it is not enough.
• The businessman must know about his financial position i.e, where he stands: what he owes and what he owns? This objective is served by the balance sheet or position statement.
• The balance sheet is a statement of assets and liabilities of the business on a particular date.

To facilitate rational decision making

• Accounting these days has taken upon itself the task of collection, analysis and reporting of information at the required points of time to the required levels of the authority in order to facilitate rational decision making.