What is Financial Accounting? Discuss its Objectives-Openbook247

Financial Accounting:

The accounting which helps in the preparation of financial accounts in order to know the financial performance and financial position of an organisation is called Financial Accounting.

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Objective of Financial Accounting:

For the sake of clarification some of the most important objectives are discussed below.

i.To ascertain financial performance:

The basic objective of accounting is to know the financial performance of an organization during a period . It is possible due to maintenance of proper record or transaction of a particular period.

ii.To ascertain financial position:

Another important objective of accounting is to find out the true financial position on a particular date.It is known by preparing the balance sheet at the end of the financial year.

iii.To protect business properties:

Another important objective of accounting is to protect and control business properties. It provides sufficient information to avoid unjustified and unwarranted use of properties. 

iv.To watch the movement of capital:

The accounting also aims at watching the upward and downward movement of capital. It helps to ensure that the capital introduced is sufficient or not to carry on business smoothly. 

V.To make comparative study:

Systematic accounting records facilitate comparison of the performance of trading results between different years. It enables us to judge whether the performance of the current year is better or not. It enables comparison to previous year or past year. 

vi.To serve as evidence in court:

Systematic record of business transactions can be used as evidence in court at the time of disputes it enables to develop good understanding among the parties.

vii.Determination of Tax:

Property maintained accounting records are very much useful in the settlement of taxation liability. It is especially helpful to ascertain the income tax and sales tax.

viii.To know the progress of business:

It is also one of the important objectives of accounting. It helps to know the performance of business from year to year. It enables timely corrective action and effective decisions. 

ix.The facilities rational decision making:

Accounting provides various information relating to different situations in a systematic manner. It enables the management body to draw a cute idea on the organization and make rational and effective decisions.

 X.External and internal reporting:

Accounting helps to maintain systematic records of business transactions. So it provides various information to the user of accounting whether they are external or internal. 

xi. Permanent records:

It aims to maintain a permanent record of all business transactions. It helps to replace the human mind because it is not possible to store all the business transactions in the human memory 

xii. Control over assets:

Accounting also aims to provide complete information of business assets. Such information enables the owner and management in full utilisation of resources. 

xiii. Motivating employees:

Accounting helps the management in selecting the best alternative of doing the things. The employees are motivated to achieve their targets by improving performance. 

xiv.Cost reduction and cost control:

Accounting also helps in cost control and cost reduction by collecting proper cost data. It enables us to minimize the cost to a great extent.

xv.Planning and policy formulation:

Accounting also helps at formulating plans and policies to carry on its business by providing sufficient information to the management body.

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