The Purpose of Accounting is to record the financial consequences of Organisational Activities. This covers any activity undertaken by or on behalf of an Organisation that results in a financial obligation or benefit.
Accounting activity also has evolved over the period of time and its importance has risen to a great extent with increasing monitoring, awareness and requirement to present Organisation's progress not just accurately but which is also authentic, reliable and comply with the applicable laws and regulations.
Accounting function has following three main elements :
It involves the recording and settlement of financial transactions arising from the Organisational activities. All transactions having a financial obligations are to be booked accurately to record and acknowledge the assets, liabilities, income and expenses of the Organisation.
Transaction Processing is mostly labelled as the basic activity under accounting but a reliable , authentic , accurate processing of transactions forms basis of the entire financial information system of the Organisation whether required for internal or external reporting purposes.
Accounting and reporting
The aggregations of financial transactions in general ledgers together with any required accounting adjustments enable the production of trial balances based on the chart of accounts. The summarised trial balance in turn enable the production of basic accounts in the form of Income ( Profit & Loss) statements and Balance Sheets.
Accounting has to be done to not only ensure authenticity and accuracy but also to make sure that it is in compliance with applicable ' Accounting Standards' issued by the regulatory body of the country ( Ministry of Corporate Affairs, Institute of Chartered Accountants of India).
Many accounting adjustments are required to ensure the compliance of applicable accounting standards.
Financial Controls are required to ensure the protection of assets and to ensure that all financial transactions are accurately recorded and reported . Activities include inter alia ' Internal Control Policies', 'Reconciling External Statements' and 'Monitoring money outflow and inflow'.