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.
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.