Objectives of Accounting

Objectives of Accounting:

As an information framework system, the essential objective of accounting is to give useful data to the interested group of users, both external and internal. The necessary data, especially in case of external users, is given in the form of financial statements, viz., profit and loss account and balance sheet. Other than these, the management is provided with additional data every once in a while from the accounting records of business.

Therefore, objectives of accounting include:

  • Maintenance of Records of Business Transactions: Accounting is used for the upkeep of a systematic record of all financial exchanges in the book of accounts. Even the most splendid manager or leader can’t precisely recall the various amounts of varied exchanges for example, sales, purchases, deals, receipts, payments, and so forth that happens in business regularly. Thus, appropriate and complete records of all business exchanges are kept and managed regularly. In addition, the recorded data enables verifiability and goes about as evidence.
  • Calculation of Profit and Loss: The proprietors/owners of the business are keen to have an idea regarding the net results of their business activities periodically, regardless of whether the business has earned profits or incurred losses. Therefore, another objective of accounting is to determine the profit earned or loss sustained by a business during an accounting period which can be effectively exercised with assistance of record of incomes and expenses relating to the business by making a profit or loss account for the period.
  • Depiction of Financial Position: Accounting additionally targets at ascertaining the financial position of the business concern in the form of its assets and liabilities towards the end of every accounting period. A proper record of resources owned by a business association (Assets) and claims against such resources (Liabilities) encourages the preparation of a statement known as a balance sheet position statement.




  • Providing information related to accounts to the interested stakeholders: The accounting records so prepared by the companies are further used by various stakeholders of the business to make better and informed decisions. The information provided by accounting is used by two different sets of parties which can be broadly divided in two groups namely – external users and internal users. External users comprise of investors, lenders, government, employees, researchers, bankers etc., whereas internal users mainly are the management of the company.

Thus, accounting serves a whole lot of users and helps them in arriving at correct decisions by providing them information about the financial position of the company.

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