How accounting helps organizations
Organizations run businesses with many goals. To make profits (profit oriented organizations), to provide human rights (non-profit organizations) etc. Goals vary with every organization where some are common among many organizations.
Achievement of such goals, are the reasons why organizations exists and it will be true if we say that organizations can only exist if they fulfill their purpose/goal.
Achievement of purpose depends heavily on whether organizations are making the right decisions at the right time or not.
To make right decisions, organizations need accurate information.
Such information needs are fulfilled by Accounting.
Functions of Accounting
Accounting serves three major functions:
- Identifying that business activity or transaction took place
- Recording all the transaction related financial data
- Summarizing or processing the data in such a way that value of data is not lost during conversion from data to information.
- Communicating the information to users of financial information to help them in making rational decisions.