The Main Purpose of Accounting

Topics: Income statement, Generally Accepted Accounting Principles, Balance sheet Pages: 3 (908 words) Published: January 14, 2013
Task one, P1.
The Main Purpose of Accounting

Keeping track of transactions and recording revenue and expenses are an important process, often assigned to an accounting department or a financial manager. Accounting allows companies to provide reports and insights needed to make sound financial decisions. The main purpose of accounting is to identify and record all activities of the income and the outcome that will affect the organisation financially. All activities, including purchases, sales, the capital and interest earned from investments are recorded in ledgers or journals. Entrepreneurs have to understand and complete a variety of business functions. An important business function when starting a business is accounting. Although many entrepreneurs may have to deal with stacks of financial documents but accounting often provides entrepreneurs with the clearest picture of their businesses success. Entrepreneurs must also keep records regarding the business start-up for tax and legal purposes. Filing records like these with great organisation will help run the business more efficiently and responsibly.

Why is it important to keep accurate financial records, and how will this help the entrepreneur? Financial records will become very important when the tax season comes but they are also important in the day to day business. Preparing financial statements such as income statements, balance sheets, and cash flow statements are important because they show how successful the business is, an income statement list revenues and expenses for the business. Accounting how much income is coming in from all channels, it can include accounts receivable, sales, etc.  These items are the business revenues.  Expenses should be clear because they are everything that is paid out of the business including the operating expenses, the difference between these will be the net income. To help the entrepreneur in the business, financial records should always be up to date so that...
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