What are the Objectives and Scope of Accounting?
Objective of Accounting
These following are the main objectives of accounting.
To keep systematic record of all business transaction
It keeps the systematic and scientific records of all business transaction regularly. Transactions are recorded as per uniform rules and principle.
To determine profit or loss
Determination of profit or loss of a business during a particular period is another important objective of accounting. It is ascertained by preparing trading and profit and loss account of the business at the end of the fiscal year.
To ascertain the financial position of the business
It gives information about the financial position of the business as on a particular date. For this a balance sheet is prepared which discloses the assets, labilities and capital of the business at the end of the fiscal year.
To provide information to the concerned parties
Another important objective of an accounting is to provide necessary information of profit and loss assets and liabilities, debtors and creditors to the various parties like owners, debtors, creditors, investor, government etc… Owner and investors are interested to know about the profitability position of the business. However, the creditors, nonfinancial institutions are eager to know the liquidity and solvency positions of the business.
Scope of Accounting
Trading concerns are established for earning profit. The accounting helps to determine profit or loss of the business. It also gives the knowledge about the debtors, creators, others assets and liabilities.
Non-trading concerns are established to provide services to the general public. Lions Club, Red cross Society are non-trading concerns and they have to keep proper records of their expenditures and revenues made throughout the year. They also need to prepare balance sheet to know financial positions and operational efficiency
To the Government
Accounting is also helps to record the expenditures and revenues of government. Every government should maintain a large number of accounting forms and books as budget sheet, cash book, bank book, statement of expenditure etc. With the help of accounting information, the government plans for future budget.
To the Professional Individual
Professional as contractors, engineers, doctors, lawyer etc.. maintain accounting books to know their surplus or deficit of income and expenditures of a particular period. Accounting also helps to farmer, worker and politician to record their sources and uses of their funds.