To maintain records of a business
Accounting enables business firms to maintain Systematic records of all financial transactions. for example purchase and sale of goods, cash receipts and cash payments. various properties and possessions as well as obligations are also recorded. accounting helps in seeing to it that there is no unautherized use or disposal of any assets or property of the business. this is because of maintenance of proper records.
Calculation of profit and loss
A businessman would be interested in knowing at periodical intervals, generally one year, the net result of business operation i.e., how much profit has been earned or how much loss has been incurred. A proper record of all income and expenses enables the businessman to prepare profit and loss account to ascertain the net result of business operations during a particular period.
Depiction of financial position
A proper record maintained of all assets and liabilities to show the value of the firm’s possessions and the amount the firm is owing to other at the end of a particular period. with the help of this systematic record, the accountant prepares the balance sheet of the firm which provides the necessary information about the financial position.
To make information available to various groups and users at a particular time
Apart from proprietors and owners, various other parties are interested in the accounting information. these are creditors, txt authorities, potential customers, employees, etc. they want to assess the profitabitiy and the financial soundness of the firm. The accounting information is communicated to them in the form of annual report and statement.