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The accounting equation and it's componants - Essay Example
Author : albertreilly
Finance & Accounting
Pages 3 (753 words)
We usually pay for our fares, refill our vehicle fuel tanks, and purchase books. In all these activities accounting is very necessary to ensure that the services are efficiently offered to all the customers keeping track of all transactions…
The accounting equation and it's componants
It is evident that every day we are directly involved in accounting transactions either directly or indirectly. This job referred to as accounting is mainly conducted by a pool of qualified person referred to as accountants. The main objectives of accounting are: To keep systematic records- The financial information is very useful in making crucial decision on a company. Thus, it is necessary to keep proper records as human memory cannot be entrusted to remember the specific details of the transactions carried out (Norton & Porter, 2010). To protect business properties- accounting is useful in safeguarding the business property by providing crucial business information to the specified persons such as managers or proprietor. Ascertain operational profit or loss- Through accounting, the net profit or loss gained by the business during a specified period is identified. This is possible by having a record of all the revenues and expenditure. The profit and loss account is specifically used to document this with excess of revenue over expenses referred to as profits. Ascertain financial position- the balance sheet is a document, which records what the business owes, and owns. From such information, the financial position of the business is established. Facilitate rational decision Making- by having done analysis of the business transaction. Accounting is capable of identifying strong points of the business and thus is an essential tool in rational decision-making. ...