(i) Maintaining systematic records: Business transactions are properly recorded, classified under appropriate accounts and summarized into financial statements– income statement and the balance sheet.
(ii) Communicating the financial results: Accounting is used to communicate financial information in respect of net profits (or loss), assets, liabilities etc., to the interested parties.
(iii) Meeting legal needs: The provisions of various laws such as Companies Act, Income Tax and Sales Tax Acts require the submission of various statements, i.e., annual account, income tax returns, returns for sales tax purposes and so on.
(iv) Protecting business assets: Accounting maintains proper records of various assets and thus enables the management to exercise proper control over them with the help of following information regarding them:
(a) how much is balance of cash in hand and cash at bank?
(b) What is the position of the inventories?
(c) How much money is owed by the customers?
(d)How much money is owing to the creditors?
(e) What is the position of various fixed assets and how these are being used?
(v) Accounting assists the management in the task of planning, control and coordination of business activities.
(vi) Stewardship: In the case of limited companies, the management is entrusted with the resources of the enterprise. The managers are expected to act true trustees of the funds and the accounting helps them to achieve the same.
(vii) Fixing responsibility: Accounting helps in the computation of the profits of different departments of an enterprise. This would help in fixing the responsibility of departmental heads.
Functions of Accounting
