Objectives of Accounting

Today we are going to deal with a more general and introductory topic:  objectives of accounting and purposes”.Accounting aims to record, systematize and document the economic and financial acts and facts that affect an organization (public or private)The need to maintain an accounting system does not occur only in relation to commercial, industrial or private sector service providers. That is why public tenders increasingly consider accounting knowledge for those who will be part of public organizations.

Third sector entities, such as NGOs, foundations and other non-profit organizations, in addition to public sector institutions, need to keep accounting in good order.These economic and financial transactions are presented in a structured manner in the financial statements, which record the company’s financial assets and rights, its obligations and debts, its operating results (profit or loss).

We can select, more specifically, the following accounting objectives:

  • Measure the resources owned by specific entities.
  • Reflect the rights against these entities and the interests in them.
  • Measure variations in these resources, rights and interests.
  • Assign the variations to determinable periods.
  • Express previous data in monetary terms

Purpose of Accounting

The purpose of accounting is to provide information to people or entities interested in the entity’s equity (assets, rights and obligations) and economic (profit or loss) situation, as well as in the measurement of its productive capacity.

The information provided by Accounting allows the organization to control and plan an organization.

Control is the process by which management verifies that the guidelines and policies defined by it and / or by the entity’s partners are being followed.

Planning is the process by which the entity’s management and partners decide which actions will be taken for the future, considering a segment or the entire entity.

It is important to note that accounting should not be used to manipulate statements or data. This science is based on facts and must demonstrate the real patrimonial situation.

Accounting Users

Another very common topic in public tenders is about accounting users (whether they are internal or external to the entity).

Find out who are the main users of Accounting:

  • Partners or owners – evaluate the performance of management and the profitability of their investments.
  • Investors – assess business risks and opportunities.
  • Suppliers – assess the financial condition of the company and thus can decide whether to supply goods and services.
  • Customers – assess whether suppliers can be ideal partners.
  • Employees – evaluate the continuity of the company, the ability to pay salaries, opportunities and conditions to negotiate salaries, if the profit sharing was properly calculated, etc.
  • Government – important user of accounting information, as it verifies that the company is up to date with its tax obligations.
  • Financial institutions  – assess whether the entity has the financial and equity capacity to carry out credit operations.
  • Competitors – assess the financial and business capacity of a competitor.
  • Administrators – are those who demand accounting information with greater frequency and depth, since they subsidize decision-making and allow to evaluate the activities of the entity.

    Accounting in practice

    Every company must take some precautions regarding the registration of its accounting. Every entrepreneur needs to be aware of the issues related to this topic. From there, the accounting can be done in the right way. As an entrepreneur, you need to keep in mind who should do what, the importance of each thing, what your responsibilities are and what the accountant’s are, when it needs to be done and the information you need to provide.

    The accounting record has the function of recording all the economic and financial events that happen within the company. It is in it that the interested parties will be able to verify what are the benefits, rights, obligation, income, expense and everything else that is necessary.

    In addition, it is mandatory, according to the General Technical Interpretation [ITG 2000], approved by the Resolution of the Federal Accounting Council 1330 of 2011. And it is applied to any type of company, regardless of its legal format or financial size.

    The accounting record must be done by an accountant or accounting technician. Despite this, it must always be done alongside the entrepreneur, who is the owner of the information. Even because it is through the accounting data that you will be able to get a sense of how the company’s financial health is.

    What is the total accumulated assets, your net worth, whether you obtained the desired profit or not. It is even from this information that you will be able to know what are the dividends available for your withdrawal.

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