Accounting

• What are the 5 purposes of accounting?

  • Compliance
  • Recording transactions
  • Control
  • Measuring performance
  • Management of business
• Importance of recording transactions

  Record all money going in and out of a business - enables them to keep track of payments received & ensure bills/taxes are paid on time.
• Importance of compliance

  All businesses have to comply with financial reporting requirements in accordance to laws and regulations - internal accounting controls helps combat fraud.
• Importance of control

  Tracks: Trade receivables - (money owed to business)

  Trade payables - (money owed by the business)
• Importance of measuring performance

  Measure how well the business is performing financially through its:

  • Gross & net profit
  • Sales revenue
  • Efficiency in collecting money owed to the business
  • Expenditure and costs
• Importance of management of the business

  Manager of business is responsible for:

  • Planning - foreseeing financial commitments
  • Monitoring - check performance and spending
  • Controlling - ensure sufficient funds to cover outgoings