Accounting or accountancy is an accounting method that involves the process of valuing the financial transactions between a firm and its customers, stakeholders and suppliers and the preparation of periodic reports and other financial documents for decision making by the internal control bodies. It is used to provide decision makers with information needed for the purpose of decision making in different areas of business including finance, operations, marketing, sales, supply chain, information technology and other aspects of business. The main goal of this method is to meet the needs and requirements of the accounting users by providing timely and accurate information to meet the objectives of the managers, investors, tax authorities and other stakeholders.
The accounting records include the financial position of the firm and the changes in financial position during a period. The main objective of accounting is to provide sufficient information to the decision makers to assist them in taking decisions regarding allocation of resources. The information provided by the accounting records helps in analyzing the performance of the firm in terms of profitability, return on investment, and operating efficiency. These records also help in determining the short and long term effects of accounting activities on the financial position of the firm.
The objective of accounting is to fairly represent the financial situation of the firm. Some of the ways in which accounting provides information are debit and credit, pricing, accruals and debits, inventory, financing, and financial statements. The process of accounting involves gathering the information needed by individuals to take action in reaction to the information they have obtained. This information is then processed to provide reports about the financial transactions that took place and the impact they had on the financial position of the firm. Some of the methods used to process the information are process of single entry bookkeeping, double entry bookkeeping, the use of the double-entry bookkeeping system, reconciliation, summarization of the financial results, management reporting systems, and the use of internal control systems.
The purpose of accounting is to record the financial information that is necessary to determine the performance of the firm. Accounting provides information that can be used to evaluate the performance of the business. An accountant collects financial statements and records them. The purpose of these statements is to provide information that will allow a manager to make an informed decision about the direction of the business. The information provided will allow the manager to make decisions that will affect the future growth of the firm and its resources.
The purpose of accounting is to provide information to decision makers so that they can make informed decisions about the allocation of resources. Allocation of resources is done according to the performance of the firm in relation to its financial transactions. Some of the decisions made include allocation of assets for daily operation and maintenance; allocation of liabilities for required disbursements; allocation of profits for the purpose of expansion and replacement of depreciated capital; and allocation of surplus cash for the purpose of liquidating capital assets and using the retained earnings to finance expansion.
The primary objective of accounting is to facilitate the preparation of financial statements that are used by decision makers to evaluate the performance of the firm. The preparation of these financial statements will result in the preparation of periodic reports called accounting reports. The reports are reviewed by the management team to identify and correct any material misstatements in the accounting records that may affect the preparation of the income statements and other related reports.