Primary Objectives of Accounting
The Main Objective of Primary Accounting are:
To maintain accounting records:
Now a days the volume of transaction is to large that human memory cannot remember them. Hence the object of accounting is to keep a systematic record of all financial transaction, all assets and all liabilities. Written records are always better than oral records, since written records can be used by different person for taking rational decisions and serve as evidence of transactions.
To calculate the results of operation:
At the end of the accounting period, the income statement e.g, profit & loss account is prepared to calculate net profit or loss. This done record of income and expenses facilities the preparation of the income statement.
To ascertain the financial position:
A position statement is prepared as at last date of the accounting period to know the financial position of an organization. The balance sheet rows various resources owned by organization and claims against these resources or assets.
The claim of outsiders against the assets is called liability and claim of owns against the assets is called capital. A systematic record of various and liabilities facilities the preparation of position statement.
To communicate the information to the users:
Accounting communication financial information to internal as well as external users. The internal user include all the organizational participant at all levels of management (i.e, top, middle and lower) Top level management requires for controlling the operations. For internal use, the information is usually provided in the form of reports like Cash Budget Reports, Production Reports, Project Appraisal Report, etc.
Since the external user (e.g, Bank, creditors) do not have direct access to all the records of an enterprise the have to rely on financial statement (i.e, position statement & income statement ) as the source of information. External users are basically interested in the profitability] and solvency of an enterprise.