About the Book

Accounting Theories

Introduction

Accounting is a complete system, which includes every activity related to the measurement and recording of different economic and financial information pertaining to an organization, which can then be used by the normal people for analyzing the business and for making decisions. The American Institute of Certified Public Accountants (AICPA) defines accounting as “the art of recording, classifying and summarizing in a significant manner and in terms of money,transactions and events, which are, in part at least, of a financial character and interpreting the results thereof.” (Corina, et. al 2012)

Objectives of Accounting

Accounting is a vast system, which includes innumerable computations, problem solving, digging out of information and presenting the same in a specified format so that it can be read,analyzed and interpreted by people. Accounting has several major objectives to follow.

Below discussed are some of the major objectives of accounting:

Recording Data in a systematic manner: For an investor or decision maker, analyzing only the present information or scenario of a company is not enough and it is crucial for them to even examine the past performances and information of a company. And that is what accounting aids by recording data and information in a systematic manner. Such systemized recording of information helps investors in analyzing options and information for any previous year as well.

Determining Financial Positioning: Every organization, big or small is required to prepare its financial statements on the basis of the given information. All this information then helps companies and the stakeholders in analyzing the financial position of the company. Different entries in the financial statements represent different aspects of financial position of a firm,hence giving a clearer picture. (Laughlin, 2006)

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