Accounting, Importance & 5 Objectives

Here are the brief note on Introduction to Accounting, Purpose of Accounting or Importance of Accounting and, Nature of Accounting etc. From the following notes, you will be able the answer the following questions:-

  • Write a short note on Introduction to Accounting.
  • Write a short note on Nature of Accounting.
  • What are the Objectives of Accounting.
  • What are the special fields of accounting.

Introduction to Accounting

The basic objective of commercial education is to produce skilled personal for looking after the administration and financial affairs of business concerns. As such this field of education includes the subject like economics, commerce, banking, insurance, management, etc. Accounting is one of the most important subject of this field. In this subject, the learner is given education and training for recording and summarizing of the business in various books.

During the earlier parts of civilization, when the business activities were very small, there were no definite principle for the recording of the business transactions. A person may use any method to record his dealings with other people like small village grocery stores in today’s date. But with the development of economic and business activities, the recording of the business transactions has become an art.

With the introduction of Double Entry Book-Keeping System, this art has developed into an organized science, which has its own principles and rules. Apart from this, the method of recording the business transactions and terminology used in Accounting differs from country to country. Due to this, various systems of accounting are found in the world.

Nature

Accounting deals with communicating the business activities of a firm to individuals and various sections within the firm and also to the outsiders. In other words, it is an art which record all the business transactions and events of financial character and classifying them in a prescribed manner. This classified record is analyzed to prepare summary results which are communicated to the concerned parties in the shape of reports and statements.

This technique of recording, process of identifying, method of measuring and language of communicating business transactions is Accounting.

From the above definition, we can ascertain that Accounting is:

  • Recording of Business Data
  • Classification of Recorded Data
  • Analysis of Summarized Data
  • Preparation of Reports
Introduction to Accounting

Objectives

The information communicated by the accounting is needed for following purposes:-

  • Owners of the business wants to know their results of activities i.e. profit earned or loss suffered and also the financial strength of the business.
  • The prospective investors and creditors of the concern are interested to know the profitability and financial status of the business.
  • Employees want to know the stability, future prospects and scope of the business.
  • The management needs various kinds of classified information to decision making techniques.
  • Various Government agencies are also interested in firm’s activities and incomes.

In view of above, we can derive that the knowledge of accounting is not merely needed by those who are engaged in any sort of accounting profession, but those who are related to business activities and general public at large, must be able to understand the language of accounting.

Special Fields

With the development of business activities and specialization in various fields of these activities, a number of branches for special study in accounting have been evolved. Some important special field of Accounting are as under:-

Financial Accounting

This field of accounting concerns with general accounting system. It is engaged in recording the business transactions in books and preparation of periodical reports for managers and general public.

Cost Accounting

The primary objective of this field is to control the cost of production and distribution. It checks the efficiency of producing, selling and administrative departments by applying actual and pre-determined cost techniques. It also shows effect on cost with changes in the volume of production and sales.

Management Accounting

This field of accounting mainly concerns with the selection of best among various alternatives. It uses all techniques of historical, estimated and actual data as a device toward positive change.

Auditing

It is the examination of accounting record. The purpose of examination is to check the fairness and accuracy, its reconciliation with prescribed policies and procedures.

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