OBJECTIVE OF A ACCOUNTING

Objective of Accounting may differ from business to business depending upon their specific 

requirements. However , the following are the general objectives of accounting.

i) To keeping systematic record : It is very difficult to remember all the business transactions that take 

place. Accounting serves this purpose of record keeping by promptly recording all the business  

transactions in the books of account. 

ii) To ascertain the results of the operation : Accounting helps in ascertaining result i.e. , profit

 earned or  loss suffered in business during a particular period . For this purpose, a business entity

 prepares either a Trading and profit and loss account or an Income and Expenditure account which

 shows the profit or loss of the business by matching the items of revenue and expenditure of the some

 period.  

iii) To ascertain the financial position of the business : In addition to profit a businessman must 

know his financial position i.e. , availability of cash , position of assets and liabilities etc. This helps 

the businessman to know his financial strength . Financial statements are barometers of health of a 

business entity.

iv) To portray the liquidity position : Financial reporting should provide information about how an 

enterprise obtains and spends cash , about its borrowing and repayment of borrowing , about its capital 

transactions, cash dividends and other distributions of resources by the enterprise to owners and about

 other factors that may affect an enterprise's liquidity and solvency.  

V) To Protect business properties : Accounting provides upto date information about the various assets 

that the firm possesses and the liabilities the firm owes, so that nobody can claim a payment which is 

not due to him   .

Vi) To facilitate rational decision - making : Accounting records and financial statement provide 

financial information which help the business in making rational decisions about the steps to be taken 

in respect of various aspects of business.

Vii) To satisfy the requirements of law : Entities such as companies , societies , public trusts are 

compulsorily required to maintain accounts as per the law governing their operations such as the 

Companies Act , Societies Act, and public Trust Act Etc. Maintenance of accounts is also compulsory 

under the Sales Tax Act and Income Tax.