Purpose of accounting

Accounting is a way of recording, analyzing, and summarizing business transactions.

o Transactions are listed in the "ledger book entries"
o Transactions are analyzed and posted to the parent book
o Finally, the transactions are summarized in the financial statements

The Need for Accounts [19659002] work, why should you take the financial information with all the disruption of accounting procedures?

Business has to provide information about its activity, as there are different groups who want this information or should know it. It seems rather vague to make it clearer, we need to look more closely at the people who need business information. We also have to think about what information is of particular interest to each class member.

Users of financial statements and accounting information

People who may be interested in financial information about the public can be classified in the following categories:

o Corporate executives.
o Shareholders of the Company.
o Contacts.
o Financial source of the company.
o Domestic Revenues.
o Employees of the company.
o Financial Analysts and Consultants.
o government and their agencies.
o The public.

Accounting information is arranged in financial statements to meet the information needs of these different groups.

Non-commercial enterprises

Not only do businesses have to report, charities and clubs prepare financial statements each year. Accounts must be prepared for the public sector organization as well.

Main Accounting Statements

Transactions are summarized in the financial statements. The two main financial statements are the balance sheet and the profit and loss account. Both the balance sheet and the profit and loss account summarize aggregate data.

The balance sheet – simply a list of all property owned and all the assets held by the given business. It shows the financial situation of the business at a given moment.

Income Statement – Recording of Revenue and Expenditure incurred during the Period.
The time chosen depends on the purpose of the statement, the so-called financial year.

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