Accounting's primary goal as an information system is to deliver valuable data to a diverse set of users, both external and internal. Financial statements, such as a profit and loss account and a balance sheet, offer essential information, especially for external users.
Aside from this, the management receives other information from time to time from the company's accounting records. As a result, accounting's main goals are as follows:
Maintenance of Records of Business Transactions
Accounting is the process of keeping a systematic record of all financial transactions in a ledger. Even the most intelligent executive or manager cannot correctly recall the large number of different transactions that take place in a company every day, such as purchases, sales, receipts, payments, and so on. As a result, accurate and comprehensive records of all company transactions are maintained on a regular basis. Furthermore, the recorded data provides verifiability and serves as proof.
Calculation of Profit and Loss
Business owners are interested in knowing the net outcomes of their operations on a regular basis, i.e. whether the company has made profits or lost money. Another goal of accounting is to determine whether a company made a profit or incurred a loss during a given accounting period, which can be done simply with the assistance of a record of the business's revenues and expenditures and the preparation of a profit or loss account for the time.
PROFIT is the difference between revenue (income) and expenditures. If a particular period's total income is Rs.6,00,000/- and total expenditures are Rs.5,40,000/- the profit will be Rs.60,000/- (6,00,000 – 5,40,000). If, on the other hand, total expenditures exceed total income, the difference represents a LOSS
Depiction of Financial Position
Accounting attempts to determine the financial condition of a company concerned at the conclusion of each accounting period in the form of assets and liabilities. The creation of a statement known as a balance sheet position statement is made easier with a good record of resources held by a business organization (Assets) and claims against such resources (Liabilities).
Providing Accounting Data to its Clients The accounting information produced by the accounting process is presented to users in the form of reports, statements, graphs, and charts, depending on their decision-making needs. Internal users, primarily management, who require timely information on cost of sales, profitability, and other metrics for planning, controlling, and decision-making, and external users who have limited authority, ability, and resources to obtain the information and must rely on financial statements (Balance Sheet, Profit and Loss account). External users are mostly interested in the following:
• Information on the risks and return on investment for investors and prospective investors.
• Unions and employee groups—information on the company's stability, profitability, and wealth distribution
• Information about the company's creditworthiness and capacity to repay loans and pay interest to lenders and financial organizations.
• Suppliers and creditors: information on whether debts will be paid on time and if the company will continue to exist.
• Customers-information on the business's ongoing existence and, as a result, the likelihood of continued supply of goods, components, and after-sales support.
• Information on resource allocation and regulatory compliance from the government and other regulators
• Environmental organizations, for example, provide information on the effect on the environment and how to safeguard it.
• Competitors- information on their competition's relative strengths and shortcomings, as well as comparison and benchmarking reasons. While the aforementioned users benefit from the company's riches, rivals need the information mostly for strategic reasons.