Purpose of Accounting

In: Business and Management

Submitted By dmeteor
Words 660
Pages 3
Purpose of accounting
For this assignment, I am going to describe the purpose of accounting in a business. First of all I will explain what accounting is. Accounting refers to recording the transactions of the business in order to create financial information. This information can then be used to do numerous things including analysing the business and evaluating how successful it is.
There are five main reasons to why a business would want accounting and these are to record transactions, monitor activities, controlling the business and it would also help in managing the business. It can also be used to measure the financial performance of the business. I am going to explain each of these in more detail below.
Record transactions
One reason as to why businesses record transactions is because they have to report their financial performance to the HMRC. The HMRC will then calculate how much tax the business needs to pay. The business needs to ensure that the information that they report is accurate or else the amount of tax they pay will be wrong and possibly more than they had to pay.
In order to record transactions, the bookkeeper has to record the income and expenditure of the business. If the information is not recorded, the business might forget to pay their bills, chase payments and they might get into trouble with the HMRC.
Monitoring activities
In order to monitor their activities, businesses can create a cash flow forecast or break-even analysis. A cash flow forecast is a document that estimates the expenditures and the income of a business over a period of time; usually a year. These documents are useful when a business wants to get a loan from a bank. This is because the business will be able to provide evidence of how they can pay back the loans to the bank.
By monitoring activity, businesses are able to judge how well they are doing in terms of…...

Similar Documents

Chapter 1 the Nature and Purpose of Accounting

...CHAPTER 1 THE NATURE AND PURPOSE OF ACCOUNTING Changes from Twelfth Edition The chapter has been updated. Approach On the first day, the usual objective is to create interest in the subject, to set the scene, and to give an overview of the course. The first part of the chapter does this. The second part of the chapter gives a fairly specific introduction to the nature of financial accounting. Instructors probably may want to bring in material from their own reading or experience to make the introductory points. Cases The cases are intended to get the student to start thinking like accountants and users of accounting information, without knowledge of any of the techniques. Ribbons an’ Bows gives students an opportunity to construct a simple set of financial statements. Kim Fuller can be used as a springboard for any type of discussion: uses of information by various parties, the cost of record-keeping, or even the development of a complete accounting system. Baron Coburg illustrates practically all of the basic accounting concepts, without naming them. It is a difficult case, but enlightening, even for those with some prior accounting training. Problems Problem 1-1 |CHARLES COMPANY | |BALANCE SHEET AS OF DECEMBER 31, ----. | |Assets ...

Words: 5110 - Pages: 21

Purpose

...When it comes to writing, it is important to consider yourself as a reader, you should always structure your material so that your reader’s can understand what they are reading. When you are preparing to write your paragraph, you should have a reason why you are writing about this topic, this is considered the purpose of the paragraph. Then, you have to state your tone in the paragraph. Your tone is your attitude towards the subject of the paragraph, you should express your feelings about how you feel about the subject topic in your writing. It is important to know your audience, if you are writing a paper that is meant for children you should not structure it like you would do for adults. You should put yourself in the mind of one of your reader’s or intended audience, this will help you narrow down information that is not needed or intended for your audience. The last step in structuring your paragraph is preparing the content or written material that will be put into the paragraph. This is an important step that goes along with knowing your audience. If you are writing material for a children’s book then you should not use words that would be hard to comprehend as a child. Also, if your subject topic has a lot of adult material or content then you should censor it so those thoughts or ideas would not be portrayed by your audience. As a writer, you should consider this guide when writing your paragraphs. You have to be able to look at your work......

Words: 311 - Pages: 2

The Purpose of Accounting

...The Purpose of Accounting ACC 290 September 13, 2012 Deborah Adams When discussing the purpose of accounting one must know what accounting is. According to dictionary.com accounting is the theory and system of setting up, maintaining, and auditing the books of a firm; art of analyzing the financial position and operating results of a business house from a study of its sales, purchases, overhead, etc. Accounting is very important concerning to the business world and keeping up with the money coming in and going out of the company, also a good sign for the people that invest in the business. Accounting helps to tell if it is worth investing in. there are four basic financial statements concerning to accounting, they are balance sheet, income statement, statement of retained earnings, and statement of cash flow. A balance sheet reports the financial position or snapshot of an accounting entity at a particular point. The balance sheet contains things such as amount of assets, liabilities, and stockholders equity. When completing a balance sheet since each asset must have a source of financing, a company’s assets must by definition equal the combined total of its liabilities and stockholders equity. Assets are the economic resources owned by the company. Liabilities are the company’s debts or obligations like bills, or credits owed. Stockholders equity indicates the amount of financing provided by the owners of the business and earnings. ("The Four......

Words: 1060 - Pages: 5

Nature and Purpose of Accounting

...Chapter 1 THE NATURE AND PURPOSE OF ACCOUNTING Changes from Eleventh Edition The chapter has been updated. The Maria Hernandez & Associates case has been replaced with the Ribbons an’ Bows Inc. case. Approach On the first day, the usual objective is to create interest in the subject, to set the scene, and to give an overview of the course. The first part of the chapter does this. The second part of the chapter gives a fairly specific introduction to the nature of financial accounting. Instructors probably may want to bring in material from their own reading or experience to make the introductory points. Cases The cases are intended to get the student to start thinking like accountants and users of accounting information, without knowledge of any of the techniques. Ribbons an’ Bows gives students an opportunity to construct a simple set of financial statements. Kim Fuller can be used as a springboard for any type of discussion: uses of information by various parties, the cost of record-keeping, or even the development of a complete accounting system. Baron Coburg illustrates practically all of the basic accounting concepts, without naming them. It is a difficult case, but enlightening, even for those with some prior accounting training. Problems Problem 1-1 |CHARLES COMPANY | |BALANCE SHEET AS OF DECEMBER 31, ----. ...

Words: 5125 - Pages: 21

Purpose of Accounting

...Purpose of Accounting Accounting serves as one of the most important functions of a company. Without proper accounting many businesses like Microsoft, Pepsi, or Home Depot would not be as successful as they are today. Accounting focuses on the economic events of a company and informs internal and external users. The focus of this paper is to define the purpose of accounting; identify the four basic financial statements; and explain how they are interrelated with each other and useful to managers, creditors, investors, and employees. The purpose of accounting is to identify, record, and communicate economic events of an organization to interested users (Weygandt, 2008) which then helps such users to understand the financial direction of a company. The first step in accounting is to identify economic events which may include payment of wages or the sale of a computer. Once specific economic events are identified relevant to a specific business the company accountant or bookkeeper then record the events to have a history of financial activities (Weygandt, 2008). After recording economic events of a company the accounting department will communicate the information to interested users consisting of CEO’s, CFO’s, investors, management, and officers. The accounting information provided by a company is helpful to both internal and external users. Internal users consisting of managers, officers, and directors use the information to make decisions to buy or sell stock, increase or......

Words: 850 - Pages: 4

Purpose

...Annie Taylor EDCI 1001- James Baker 9/25/11 My Purpose In Life The literal meaning of the word “purpose” is “the reason for which something exists or is done, made, or used.” I believe my purpose is to follow the footsteps of the Lord. I was raised Catholic, went to Catholic grade, middle, and high school. Both my parents are Catholic and I am very thankful for having a solid moral “ground” for which I was able to grow on. I went to Christian camp for 9 years growing up and it was there that I really found my purpose in life. Surrounded by young adults as my counselors and mentors, I was able to easily relate to them and was set a good example of how I want to be when I am their age. I am their age now and I feel like I am on the right track but it is an ongoing journey to fulfill my goal of following the Lord in most everything I do. My mother always used to say, “Do one random act of kindness everyday”. She told me it was a way to give back to the Lord for all the blessings and gifts he gave me. That is one way I do to reach my purpose. Another way is going to church. There are many things I do not agree with in the Catholic Church but it is the closest way I feel I get close to the Lord. Going to church makes me feel like I am better suited to fulfilling my goal. I use it as a “refresher course” or reminder of what I need to do to be a happy person. I’ve been though stages of my life when I greatly doubted the Lord. Whenever I am in doubt, looking through my......

Words: 373 - Pages: 2

No Purpose

...To have no purpose means that you are living and doing things for no reason, because you do not know who you are or why you are on this Earth. It also means that whatever you do in life is meaningless and there isn’t anything that you do that you like or enjoy. If you are working or going to school, you’re just working and going to school, not giving your all, or doing it because someone else, such as your parents or peers says that you must do these things. If there is a purpose, it means that you know why you are on this Earth, why you are living, and why you are doing the things that you do. With purpose, you are living and doing things to get something out of it. Doing things with purpose makes a purpose feel life and feel good about doing certain things like going to school, work, or indulging in a special hobby that makes you happy. In relation to the Fact/Value Dichotomy, to have no purpose, one seems to not have morals or values, or even a conscience, when there ought to be. Some examples are people who rob, steal, or even kill. They do these things because deep down, they have not valued their own lives; therefore, they don’t value anyone else’s. In relation to the Faith/Reason Dichotomy, to have purpose is to have faith of the unseen. Although a person may not like his or her job, he or she goes to work because in the end, they know that they will benefit from working, thus, they give their all day by day...

Words: 277 - Pages: 2

Purpose

...Statement of Purpose I am the first in my family who ever went to college. Coming from a low-income African American family, I had to overcome many challenges to graduate from college. My experience at the University of Texas at Austin has been tremendous. It has opened up exciting possibilities for my life, including the opportunity to get a higher degree. I have always believed in education. Growing up in a poor neighborhood in Houston, Texas I saw so many young men and women disillusioned, and never had the opportunities to experience a good college education. We need to make higher education more accessible to the urban poor. This will require concerted efforts both at the level of the educational institutions and the low-income communities. I want to be part of this effort. I majored in ‘Youth and Community Studies’ with these aspirations in mind. As an undergraduate student at The University of Texas at Austin, I worked in a number of education related capacities, as – middle school STAAR tutor, physical education teacher assistant, sports counselor at the YMCA of Greater Austin and as basketball coach for middle and high school girls. My job experiences have given me a wonderful opportunity to learn and work with people of different cultures, lifestyles, beliefs, and backgrounds. In particular, my teaching, tutoring and coaching experiences at Austin Discovery School and YMCA of Austin gave me a good perspective of how public and private schools operate,......

Words: 661 - Pages: 3

Purpose of Accounting

...TASK 1 Purpose of Accounting In the modern day it is important for any business to have a good knowledge of different accounting process and help to understand how the business operates. Anyone from potential investors to stakeholders could look to see how well the business is going. We all know that any kind of idea could fail if their owners doesn't very carefully manage the business accounts. Purpose of accounting include recording different financial transaction ,planned or actual and with this figure producing final information.There are a plenty of different reason why accounting is so important to the progres of the business Record transaction-It is very important for any business,all the money coming in or out of business has to be very carefully recorded by the owners or bookkeeper.If the business is fail to keep correct records could lead the business to trouble with different institution or HMRC including to pay the builds or to pay correct amount of tax. Monitor activity- The record has to be updated (often dayly )so in this way could give a good indication how the business is going in all different conditions (sales,receiving payment, paying expenses).This way the owners will have a better idea,if the sales or expenses doing up or down.Another important part of monitoring of activity is the bank balance of the business to assure that business can meet all day to day operation cost. Control-If The recording of transaction and monitoring of......

Words: 688 - Pages: 3

Statement of Purpose

...Statement of Purpose Name Statement of Purpose If one were to ask my close friends to describe me, they would apparently describe me as a self-motivated, diligent, diverse and intelligent woman. I think one of my unique characteristics is the diversity of experiences I possess. Additionally, I am a woman with technical propensity and an interest in accounting. I also have a passion for reading, travelling, and understanding diverse values of the world. All these elements have given me a broad perspective with varying degrees of knowledge on a range of topics. I have robust believe that despite the fact that these qualities are not directly related they will directly play a big role in my graduate work. After graduating with a degree in science (general accounting) from King Abdul-Aziz University in Jeddah, I feel my interest in accounting has strengthened and has thus fuelled my resolve to progress into a field that I find both fascinating and innovative. My general accounting degree has given a strong foundation to my skills since it involves a lot of sophisticated, long, and intricate calculations and the application of basic math skills. In essence, this has enabled me gain considerable knowledge of fundamental accounting concepts. As such this knowledge has given me the confidence to pursue a master’s degree. During the course of my undergraduate degree, I gained an in-depth knowledge of different accounting-related subjects such as auditing, financial......

Words: 598 - Pages: 3

Financial Statements - Purpose of Accounting

...Financial Statements - Purpose of Accounting ACC 280 May 17, 2011 Carol Harker Financial Statements - Purpose of Accounting Every business has a need to generate profit and remain in the black. In today’s business world, it is important to have the means to track and monitor the gain or increase of income and profits within the organization. According to Weygandt, “Accounting can be defined as activity that is used to identify, record, and communicate the economic events of a business.” (Weygandt. 2008.) Included in the report we will discuss the purpose of accounting and identify the four basic types of financial statements that are used. Finally we will discuss how the core financial statements of accounting are connected to each other and their uses for all stakeholders in a company. The purpose of accounting is to keep track of economic events for a business. “Accountants are primarily employed to track the flow of money through an organization” (QuickMBA, 2010). Good accounting practices make it easy to keep track of finances for any type of business. “Keeping an accurate balance sheet is a fundamental part of running even the most basic of an organization” (QuickMBA, 2010). Activities such as sales, purchases, and any interest earned from investments are classified as economic and posted to a specified account record. Accountants have a code of ethics that they must adhere to ensure integrity in the reporting process. The use of an accounting system for a......

Words: 1063 - Pages: 5

Purpose of Managerial Accounting

...Purpose of Managerial Accounting M B Colorado Technical University Online August 26, 2014 Purpose of Managerial Accounting The purpose of this presentation is to convey the importance and purpose of managerial accounting, how the managerial accountants support the strategic decisions, ways strategies can be implemented by management and strategy implementation steps that managers can take. As the Board of Directors you will be charged with interpretation of information provided by the accountants. As a board using the financial and managerial accountants’ reports and feedback will assist with the planning and execution of decision that will strategically allow all employees from management down to the front line to operate efficiently. The purpose of managerial accounting is to take historical information, such as financial statements, budgets and operations reports to create a plan focus inwardly within the company. Managerial accounting is a system of providing and measuring financial and operational information. The system is designed to motivate behaviors, guides managerial action, and support and create necessary cultural values needed to achieve an organization’s strategic objectives (Geense, 2005). Managerial accounting is comprised of 4 ideas that are the key to its definition. The ideas capture the purpose, scope, attributes and nature of managerial accounting. Cost and operational information, including some financial information define the scope.......

Words: 831 - Pages: 4

Purpose

...I want my purpose in life is to contribute to a better world. To do this, I have made it a priority to incorporate this goal in to my values and develop habits that will allow me to achieve this ultimate goal. Through my work, school, and relationships, I have found that when I focus on my ultimate goal, and applied my values, I have been able to experience enormous success in all three aspects of my life. These values that I find most important are integrity, respect and awareness. With work, my goals are to keep challenging myself and find a career that fits me the best. This career should be a fast paced, customer oriented and plenty of opportunities to continue to learn. Currently, I’m part of a planning and research team that evaluates flood risk and propose potential mitigation solutions. I have been able to excel in my position because I have applied my values consistency through all of my work. When evaluating flood risk, a lot of the data used is sensitive information therefore having integrity is essential since people need to trust me with this information. Additionally, flood risk resiliency planning involves many stakeholders, therefore prioritizing respect when communicating with others is essential for working together. Lastly, flood risk management involves both a qualitative evaluation approach and a quantitative analysis. By having awareness for others, I believe it has helped me to develop solutions that take in to consideration the many impacts that a......

Words: 479 - Pages: 2

The Nature and Purpose of Financial Accounting

...preservation of systematic records, is only one aspect of accounting. Accounting also involves structuring the information so that it can be used to evaluate the performance of the company and make decisions about the future. b. True. Accounting is designed around the tabulation of numerical information. Also, accounting data relate primarily to a company’s financial activities; information about personnel matters, community relations, etc. must come from other information systems. c. False. Managerial accounting information is used by internal users; financial accounting information is provided to external users. d. False. The balance sheet is a listing of a company’s assets, liabilities, and owners’ equity. The income statement reports net income which is the excess of revenues over expenses. e. True. Financial analysts closely follow large companies and publicly report any indications of unusual financial performance. Small companies are not followed by analysts, so investors must do more homework themselves. f. False. Accounting standards in the United States are set by the FASB. The IRS has no direct connection with financial accounting standards. g. False. The IASB (International Accounting Standards Board) is an international body formed to create a common set of worldwide accounting standards. h. True. A CPA (certified public accountant) is an accountant who has received college-level accounting training, passed the CPA exam, and satisfied......

Words: 4644 - Pages: 19

Purpose of Accounting

... Running head: Accounting Understanding Accounting and Financial Statements 23 September 2010 ACC 280/ Michael Pagano Understanding Accounting and Financial Statements Businesses can be impressive institutions. There are many factors that are combined to make a successful business. These businesses usually have strict code of conducts and ethics that guide the company in its daily practices. Some areas of the business receive more attention than others. One department that receives constant attention is the accounting or finance department. This is a department that is responsible for many aspects of the business. This department gives managers and employees the monetary status of the company enabling them to make important decisions to guide the company. It is important that individuals are able to understand basics of accounting and the four basic financial statements. Purpose of Accounting Accounting serves many important functions in a business. First an individual needs to have a basic understand of accounting. Accounting consists of three very basic activities which are identifies, records, and communicates financial information within a given period. The first activity is to identify events relevant to the company during that time period. Accounting also records events in order to provide history of its financial activities. This activity of records must be systematic and in chronologically. The last major activity that accounting demonstrates is......

Words: 738 - Pages: 3

United Kingdom | 11 led 2012 19:40 | Paranormal Activity 3D HOU BluRay 3D 1080p