Q:

What are some objectives of accounting?

A:

Quick Answer

Accounting has several objectives including being a basis to judge credit worthiness, to measure outcome, to have a permanent record, for planning, for efficient resource use and to make accurate projections. In order for businesses to remain competitive, businesses must invest in an elaborate accounting department or strategy.

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Full Answer

Accounting mainly deals with finances, planning, resource allocation and accountability. A good accounting system is able to help a business grow and become profitable by meeting the following objectives.

Credit worthiness: in order for a financial institution to approve a loan or grant, it must be presented with clear records of financial activity and accountability. Accounting is the basis for these firms to judge whether a business is worthy of credit or loan advancement.

Records: a business that has permanent records can easily use them for future reference. The records can also help in dispute resolution in certain cases.

Resource allocation and use: accounting gives a clear path on how resources are to be allocated and used. It also promotes transparency in the use of resources.

Projections: in order to correctly determine what the future holds for a business, comparing certain accounting data may be of great help.

Planning: accounting helps a business put in place strategies for better success. It also helps in anticipation of certain risks and mitigation solutions.

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