+64 021760312

+64 3901527


info@businesspillars.co.nz




What is the primary objective of accounting?

Accounting has one purpose: letting you know what happened in your business from a financial standpoint. It is likened to a history lesson, which is not unimportant; however, only you will genuinely benefit by interpreting this history. It is also known as the language of business. It is not necessary to look at numbers but a few meaningful relationships that speak for themselves. Not only how much profit you made, but what it concerned something else.


Accounting is the art of recording, classifying, summarizing, and analyzing the transactions in terms of money and can be recorded in the books of account for different results. Hence, accounting, and as such, benefits management in many ways. Accounting involves recording transactions and compiling them in reports.


The essential purposes of accounting Services are-

  1. Determining profit or loss- This means it helps determine financial performance, i.e., profit earned or loss incurred. This is analyzed with the help of Trading and profit and loss accounts.
  2. Determining financial position - This is known as a balance sheet. By performing it, the position of the business is analyzed by the users for inter-firm and inter-firm comparisons.

The primary objectives of accounting are as given below: -

1. To maintain a business record: The main aim of accounting is to keep a proper record of financial transactions for future use. These records can be used as and when required by the users.

2. To ascertain profit or loss: The primary objective of every business is to earn a profit. Therefore, accounting means establishing profit or loss made by a business over a given accounting period. For this purpose, an income statement or Trading and profit and loss accounts are prepared.

3. To present financial position: - It is used in the preparation of the balance sheet. The balance sheet shows the valuable importance of the organization.

4. To provide information to the users: - It provides financial information and the result of the business operation to internal and external users. The internal users include all the organizational participants at all levels of management. For example, the officer and staff of an enterprise need helpful and timely information for making different types of business decisions. In addition, the investor, lenders, financial institutions, the government, etc., are external users.

5. To help determine the tax amount: It is also helpful in calculating accurate liabilities relating to income tax and other taxes.

6. It also helps evaluate the employee and their working efficiency and communicate and spread the accounting information to the user.

7. Accounting contributes the biggest to any organization by preventing fraud and prevents profit risks

  •     1. Business    
  •     2. Government organizations    
  •     3. Non-Government organizations    
  •     4. Individuals    
    1. Business    

Accounting is extensively applicable in the business sector. Today, in the present day, most people are engaged in the business sector. Therefore, all businessmen follow the Generally Accepted Accounting Principle (GAAP) to determine the business firm's profit, loss, and financial position.

    2. Government organizations    

Though government organizations do not follow the Generally Accepted Accounting Principle (GAAP), it keeps systematic records of all transactions to find the position of public funds.

    3. Non-Government organizations    

Non-government and service establishments such as NGOs, INGOs, Red Cross Society, SOS, etc., that play a vital role in the nation's progress also utilizes accounting. The accounting system used in these establishments is usually called fund accounting.

    4. Individuals    

Individuals also perform commercial activities to earn their livelihood. Therefore, they also serve some form of accounting to draw financial information for making personal economic decisions.

Accounting reports can be analyzed to provide management with financial information that can be used to run a business, plan, and make changes when the business is not going as expected. For example, suppose sales of a particular item are flat and not as expected. In that case, accounting reports show this reality, and management can make decisions about it--a clear advantage of accounting information.

Benefits of Accounting
  1. Information about the financial position.
  2. Establish a profit or loss during a period.
  3. Having better accounting controls
  4. Accounting helps in decision-making.
  5. Accounting records are proof of acts.
  6. Collection and payment of cash.
  7. Accounting helps in obtaining loans for business.
  8. It helps investors and government & others.

Meaning of accounting given by the American institute of certified public accounts in 1961 "Accounting is the art of documenting, categorizing, and condensing in a meaningful manner and terms of money, transaction, and event, which are, in part, interpreting the results thereof."


Recording refers to creating journal entries for every financial transaction with debit and credit amounts.


Classifying refers to classifying each debit/ Credit Transaction to capital or Revenue and Assets, Liability, Revenue, or expense.


Summarizing refers to grouping the transactions of assets, liability, revenue, or expenses and preparing the financial statements such as profit, and loss account, Trading, and Balance sheet.

In case of

  • Trading, Manufacturing and customer service-oriented organization, the sum of all income and expenses are referred to as profit and loss account.
  • Social service-oriented organizations like schools, Hospitals, and Government Organizations, Banks are referred to as Income and Expenditure accounts.
Income and Expenditure accounts
Financial Consulting

Contact us

We'll get back to you ASAP.