Functions of Accounting

Accounting functions play a key role in managing, analyzing, and communicating the financial information of any business organization.

1. Identification and recording of financial transactions : Identification and recording of financial transactions is the basic function of accounting. It is not possible for any organization to remember the transactions that have taken place throughout the year, so it is necessary to identify and record financial transactions.

2. Classification and summary : If the recorded transactions are in order, then the users can use them meaningfully. Classification and summary make it easy to establish the profitability of the business, evaluate the financial position of the business and keep records. Classification and summary make it easy to check the mathematical accuracy.

3. Analysis, interpretation and communication of information : To explain the actual situation of the financial statements prepared in the transactions of the business. This makes it easy to understand the strengths and weaknesses of the business in terms of profitability, liquidity and financial position of the business.

4. Decision support : If the financial transactions in the business are recorded in a process, it provides the manager with the necessary financial information to plan for the future.

5. Control : Identification and recording of financial transactions, classification and summarization, and if the recording of financial transactions is correct, financial statements help in controlling expenses, income, assets and liabilities.

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