13 Objectives of Accounting
The purpose of the objectives of business accounting is to systematically report everything related to the analysis of transactions and prepare both the financial statements and the balance sheet and income statement.
This type of information allows adequate financial decision-making and fluidity in the procedures of activities, transactions, and commercial events that benefit the organization.
- Main objectives of accounting
- #1.Identification and maintenance of the transaction log
- #2.Estimate of the profit and loss statement
- #3.Preparation of the balance sheet
- #4.Analysis of the financial statements
- #5. Facilitate decision making
- #6.Detection and prevention of fraud
- #7.Maintain balance
- #8.Error prevention
- #9. To secure a position in the company
- #10.Statement of liquidity
- #11.Actual financial statement
- #12.Audit of costs and assets
- #13.Management, social, and tax audit
Main objectives of accounting
Next, we will analyze how the objectives of accounting can be understood and achieved in a company :
#1.Identification and maintenance of the transaction log
The objective of the accounting processes of a company is to make systematic records of the different financial activities, maintaining them allows to ensure the optimization of analysis of the precise decision-making and thus benefit the company financially.
#2.Estimate of the profit and loss statement
It is often difficult to accurately estimate the profit and loss statement of an organization, especially if accounting documents are not properly prepared and maintained, this could undermine the soundness of decision-making in the company.
#3.Preparation of the balance sheet
The good development of a company is easier to understand when it is based on the financial data provided by the accounting departments of the company in a correct balance sheet, which will help you to establish the proposed objectives.
#4.Analysis of the financial statements
This objective determines the status of the financial processes of the company, which includes liabilities, assets, debts, and properties through updated and continuous information regarding the financial status of the organization.
#5. Facilitate decision making
An efficient accounting makes it easier for the company to make adequate decisions involving capital investments and high payments and incentives for employees.
#6.Detection and prevention of fraud
When fraud and financial mismanagement occur, the loss of the company can occur, in this sense, one of the main objectives of accounting is to prevent this from happening by making records of the actual transactions of the same.
If the records are adequate, the company can be sure that no employee can commit fraud, since the accounting will facilitate the transparency necessary for the company to reduce any incidents.
To maintain a balance of cash inflows and outflows, the accounting has to be correct in maintaining the financial accounts of the organization.
Organizations seek to maintain systematic financial records, where proper trial and error is carried out, and thereby correct potential future accounting errors that may be made.
#9. To secure a position in the company
This is one of the most important accounting objectives since the accounting work provides extensive information on the financial statements that allow achieving the objective of the organization.
#10.Statement of liquidity
Having a thorough knowledge of the state of liquidity is a benefit to the company, this will help business managers to know how much money and resources have to make payments on their financial commitments and will be useful for the calculation of the capital it is used to pay liabilities.
Improper accounting could lead to inefficient corporate financial management and lead serious to close down.
#11.Actual financial statement
To obtain correct compensation for the financial status and good position of the organization, it is essential to have an audit that helps the company to know if it is heading in the right direction.
#12.Audit of costs and assets
The correct audit of costs and assets is carried out through the objectives of business accounting to estimate the benefits that will generate high profits for the organization.
#13.Management, social, and tax audit
Another objective of accounting is to carry out management, social, and tax audits. This is due to the difficulty that companies present to carry out commercial operations, without having to use the organization’s accounting books.
The objectives and importance of accounting are based on maintaining the records of all transactions constantly and systematically in the company and turning to maintaining and evaluating them to make solid decisions and achieve growth that benefits the company.
Sources and references:
- Bhasin H. (2019, February) What are the Objectives Of Accounting?
- Dagab Kirti (2019) The 10 Most Important Objectives of Accounting?