The primary objectives of financial accounting are:
- Compliance with legal prerequisites
- Record keeping
- Management decision-making
- Attaining the balance
- Regulation of errors
- Profitability of a Business
Explain all objectives of financial accounting
1. Compliance with legal prerequisites
The initial goal is to make sure that a firm is complying with the tax’s rules and regulations , corporation’s Act and any other prerequisites of the nation that a firm needs to runs its operations.
2. Record Keeping
Record keeping maintains a business’s financial transactions for the single rationale of evaluating a loss or profit of a firm; otherwise it would remain difficult to institute prospect decisions regarding the corporation.
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3. Productivity of a business
This objective is to gauge the loss or profit of a company, because statements of income illustrate the expenses and revenues and loss or profit that a firm gets at a specified period.
4. Management decision-making
The accounting procedure assist proprietors or supervisors to assess and see their financial conditions and generate analytical and sound decisions of optimizing profits or sales for the prosperity of the company.
5. Attaining the balance
This objective assists in keeping the balance between the outflow and inflow of the finances of a firm. It assists the firm in staying afloat and in determining whether the organization has adequate cash or liquidity to pay its expenditures.
6. Regulate or prevent errors
This objective helps in assuring that a firm’s assets are not wrongfully impacted to a juncture it generates a butterfly impact. Besides, it assists in preventing fraudulent actions.
7. Preparation of financial statements
Preparing financial statements is a core rationale process of financial accounting. Financial declarations are summarized figures originating from the accounting system. Thus, it is difficult to prepare financial statement in absence of efficient financial accounting activities.