In this article, you will discover the objectives of accounting in detail

Meaning – Accounting is the method of recording, classifying, and reporting business transactions for a business. Principles of accounting are basic norms and assumptions developed and established as the basis for an accounting system. These principles are adopted by accountants universally. 

Accounting plays an important role in an organization. Accounting assists you create the exact financial status of your firm with all its crucial aspects. We will explain the basic objectives of accounting in this post.

Objectives of Accounting

  1. Record keeping 
  2. Analyzing and ascertaining the financial results
  3. Analysis of the financial status of affairs
  4. Decision Making
  5. Liquidity Status
  6. Securing the positioning
  7. Accountability
  8. Legal Objectives
  9. Detection and prevention of frauds
We will discuss all Objectives of Accounting in detail
Being one of the best aspects of an organization, Accounting has a lot of simply defined objectives to work with. The objectives may also vary based on the class of the business you belong to. We will examine the objectives of accounting from a wider perspective and learn how these objectives can be achieved.

Recording Keeping

 A human being is limited learning power, we can’t remember all things for a long time with accuracy. The most brilliant executive or manager cannot remember perfectly. The basic and first objective of accounting is to record the business transactions and situations by proper classification and book-keeping in proper books to show assets, liabilities, capital, profit, and loss. Systematic record keeping will assure a correct level of study to reach the financial health of an organization.
That makes Systematic Record-Keeping the supreme objective of accounting. This will go a long way in examining systematic and proper decision-making. Before you can perform any other objectives of accounting or any other part for that matter, a proper record should be one of the fundamental elements and creates a backbone of the organization.

Analyzing and ascertaining the financial results

If you want to know the exact status of the financial health of your business at the end of a particular period. Normally, businesses prefer regularly results of their operating finances.
The accounts department provides details of the profit and losses of the organization based on the income statement created with the help of the records that it has kept for the time. It is an ongoing method and continues irrespective of the specified time.

Analysis of the financial status of affairs

Accounting also has the objective of determining the status of the financial affairs of the business. This will involve debts, liabilities, property, and assets. The accounts sector should be able to give fresh information on the financial health of the company on an ongoing basis.
This is ideally done through the balance sheet. This will give a glimpse view of the financial status of the organization at any given time. The balance sheet will be effective in analyzing the financial status of the company and in turn creating future decisions & targets.

Decision Making

Another objective of accounting is Decision making. Systematic accounting will be an important factor for making business decisions and set practical goals for the aims and plans for future extension
examples of the decisions that can be supported by accounting can be
  1. The pricing of the goods to gain the maximum potential profit. Since accounting lets you succeed at the operating costs and the other costs included in the production of the product, you can reach realistic pricing without being ambiguous.
  2. Helping to make choices where the company may need to get additional financing. This holds in case of new goods launches or expanding into a new business.
  3. Accounting can also be crucial in settling on a non-performing good or service.

Liquidity Status

Having knowledge of the liquidity status of the company is also an essential aim that accounting requires to fill. Mismanagement of cash flow is often cited as the primary reason for failure in many startups. Accounting helps businesses in reducing the risk of bankruptcy through timely detection of financial bottlenecks and managing cash flow in a way that the business always has sufficient liquid funds available to pay for its financial commitments. 
Accounting should be such that it helps the managers and business proprietors to determine how much cash and other sources they have at their disposal to pay for the financial duties they may have. The theory of liquidity will also be effective in working out the quantum of the working capital and the capital that can be utilized for paying off the liabilities.

Securing the positioning

One of the important objectives of accounting should be to assist in the positioning of the organization. Accounting gives you a good understanding of financial statements to assist achieve this purpose. The financial status of a company will ideally go a long way in helping the financial status of the company.
The financial statements that can serve to ascertain the financial position of a company involved
  • The cost of capital is raised by the company for the benefit of managing the business.
  • The whole balance sheet of the company showing total profit or loss.
  • Accounting has the purpose of operating and sustaining all these statements to give a healthy picture of the company.
  • The liabilities of the company. This relates to the amount that the company owes others


One of the essentials objectives that accounting can perform to perfection will involve improving the accountability of the business to its whole abilities. It is the accounting part of the company that gives a reliable base for the estimation of the real performance of the company over some time.
This will also go a long way in supporting the accountability of the company in the long term and through the various tiers of the organizational authority. Financial statements from the accounting staff can also be helpful in providing enough confidence for the shareholders. If the performance is bad, the same financial statements can serve shareholders hold the directors and promoters of the company accountable. This can also be effective if you are planning for financing your new projects. Creditable and accountable financial status can assist you in safe financing either through loans or from investors.

Legal Objectives

Accounting can also grow up as legal support for the company in support of its financial status. Thus one of the necessary objectives that accounting would need to handle is to meet the legal demands of a company.
Accounting has become a legal requirement under worldwide law. every business is required to manage and maintain the financial record of the transactions for the specified periods and share this information with the shareholders, promoters, and managing agencies. Moreover, proper accounting can also be effective for you as an organization to arrive at the correct financial rights, obligations, and liabilities positively.

Detection and prevention of frauds

Financial mismanagement and scams are some of the top reasons that can bring about ends or losses for a business. The main objective of auditing is to ensure the financial reliability of any organization; The detection of fraud is just an incidental object. Employee fraud is a notable problem faced by organizations of all types, sizes, locations, and industries.
Free opinion and judgment form the objectives of auditing. The job of an Auditor is to ensure that the books of accounts are kept according to the rules stipulated in the Companies Act; an Auditor also requires to assure whether the books of accounts show a real and fair view of the state of affairs of the company or not.
When the records are proper and authentic, you can ensure that no employee of the organization will be able to indulge in any financial activity that is fraudulent. Accounting will bring in the much-needed clarity into the transactions of the business as a whole and thus assures that the measures of fraud are reduced to almost none.

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In reality, the important objective of accounting is to control and maintain a proper record of each of the financial transactions in a systematic way and examining these records to reach the right financial health of your business. Once it begins achieving this goal, the rest of the goals we have outlined above will rightly fall in place.
In any case, accounting forms are a critical part of a business and go a long way in building the credibility and accountability of the company positively. It assists any business proprietor to determine the results and financial position that his business and aids him in taking the right decisions on the path to growth.
I hope you guys must have known the accounting purpose  But still, if you see any need in this post, then please give your view in the comment box and help us to improve that deficiency, thanks.

Faq on Accounting 

1. What is the main objective of accounting? 
Answer- The main objective of accounting is to keep a systematic record of financial transactions.
2. What are the 5 main objectives of accounting?
Answer- 1. Recordkeeping, 2. Analyzing and ascertaining the financial results, 3. Analysis of the financial status of affairs, 4. Decision making, 5. Liquidity Status

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