briefly explain the functions of accounting

The following are the various functions of accounting.

1. Recording Business Transactions Systematically- Accounting aims at recording a huge number of business transactions in the books of accounts in a systematic and an organised manner. This systematic record of transactions helps in a eliminating the chances of errors and frauds in the business that can take place while carrying out business activities.
2. Determining Profit or Loss- Every business organisation is interested in knowing its net results in terms of profits or losses for a particular accounting period. The difference between revenues and expenses is regarded as profit or loss during the year.
3. Assessment of Financial Position- Only determining the profits or losses from the business activities is not enough. It is also very important for a business to know about its financial strengths and weaknesses. This can be easily assessed by preparing a Balance Sheet. A Balance Sheet is a statement showing various assets and liabilities of a business.
4. Assistance to Management- One of the important objective of accounting is to assist the management by providing them the vital and relevant information. Management uses this information for their effective decision making, formulating plans, efficient control on business activities, etc.
5. Assessment of Progress of Business- Accounting helps in comparing the results of two or more periods. This in turn helps in assessing the trend of growth and progress of the business.
6. Detection and Prevention of Errors and Frauds - There is always a possibility of errors and frauds in the business while carrying out its activities. The chances of their occurrence is minimised to a great extent by maintaining the systematic record of various business transactions.
7. Communicating Accounting Information- An important step in the accounting process is to communicate the financial and accounting information to its various users including both internal and external users. This assists the users to understand and interpret the accounting data in a meaningful and appropriate manner without any ambiguity.