Kerala Financial Corporation Assistant notes|Objectives of Accounting

on Friday, October 18, 2019 in Accountacy, divisional accountant, Financial corporation Assistant, kerala Financial corporation Assistant, Kerala PSC Previous Question Papers, Previous Questions Kerala PSC

Objectives of Accounting|Kerala Financial Corporation Assistant notes

Kerala PSC is conducting Kerala Financial Corporation Assistant Exam on 19 October 2019. Some Expected Questions on Accountancy are given below:

You can get the syllabus of Kerala Financial Corporation Assistant by clicking Here
You can get the MCQ Questions set 1 HERE
Read the Accountancy Basic Questions HERE
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Read Why we need Accounting? Who are the users of Accounting?
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Objectives of Accounting

As an information system, the basic objective of accounting is to provide useful information to the interested group of users, both external and internal.

The necessary information, particularly in case of external users, is provided in the form of financial statements, viz., profit and loss account and balance sheet.

Besides these, the management is provided with additional information from time to time from the accounting records of the business.

Thus, the primary objectives of accounting include the following:

1. Maintenance of Records of Business Transactions

Accounting is used for the maintenance of a systematic record of all financial transactions in a book of accounts.

Even the most brilliant executive or manager cannot accurately remember the numerous amount of varied transactions such as purchases, sales, receipts, payments, etc. that takes place in business every day.

Hence, proper and complete records of all business transactions

are kept regularly.

Moreover, the recorded information enables verifiability and acts as evidence.

2. Calculation of Profit and Loss

The owners of a business are keen to have an idea about the net results of their business operations periodically, i.e. whether the business has earned profits or incurred losses.

Thus, another objective of accounting is to ascertain the profit earned or loss sustained by a business during an accounting period

which can be easily workout with the help of a record of incomes and expenses relating to the business by preparing a profit or loss account for the period.

Profit represents the excess of revenue (income), over expenses. If the total revenue of a given period is Rs 6,00,000 and total expenses are Rs. 5,40,000 the profit will be equal to Rs. 60,000(Rs. 6,00,000 – Rs. 5,40,000).

If however, the total expenses exceed the total revenue, the difference reflects the loss.

3. Depiction of Financial Position

Accounting also aims at ascertaining the financial position of the business concern in the form of its assets and liabilities at the end of every accounting period.

A proper record of resources owned by the business organization (Assets) Qualitative Characteristic of Accounting Information Decision Makers (Users of Accounting Information)

and claims against such resources (Liabilities) facilitates the preparation of a statement is known as balance sheet position statement.

4. Providing Accounting Information to its Users

The accounting information generated by the accounting process is

communicated in the form of reports, statements, graphs, and charts to the users who need it in different decision situations. As already stated, there are two main user groups,

viz. internal users, mainly management, who needs timely information on cost of sales, profitability, etc. for planning, controlling and decision-making and external users who have limited authority, ability and resources to obtain the necessary information and have to rely on financial statements (Balance Sheet, Profit, and Loss account). Primarily, external users are interested in the following:

• Investors and potential investors-information on the risks and returns

on investments;

• Unions and employee groups-information on the stability, profitability

and distribution of wealth within the business;

• Lenders and financial institutions-information on the creditworthiness of

the company and its ability to repay loans and pay interest;

• Suppliers and creditors-information on whether amounts owed will be

repaid when due, and on the continued existence of the business;

• Customers-information on the continued existence of the business and

thus the probability of a continued supply of products, parts and after

sales service;

• Government and other regulators- information on the allocation of