Essay on P1 the Purpose of Accounting

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Pages: 9

P1 Describe the purpose of accounting for an organisation

What is accounting

Accounting is a recording, reporting, and analysis of financial transactions of the business. The person which is in charge or accounting is known as an accountant, this person is specifically in charge to follow rules and regulations, such as the generally accepted accounting principle. Accounting lets businesses to analyze the financial performance of the business, and look for statics such as net profit.

The accounting process

The accounting process is a chain of activities that begins with an operation and ends with the closing of the books. Because this procedure is repeated every reporting phase, it is referred to as the accounting
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Any dividend or extraction accounts also are closed to capital.

Key users of accounting information

Accounting information is a suitable tool for individual and other organisations reviewing a business action. Financial statements are the maximum common accounting reports used to measure a business’s performance. Accounting information users can be internal or external business stakeholders. Business stakeholder is a term that indicates an individual is invested personally or financially have an interest in a business.

Primary users of accounting information
Business Owners
Business owners are possibly the most essential user of a business accounting information. Business owners review financial statements to decide how much profit the business has made during a certain time period. The income statement contains information on the company's revenue, sales, expenses and cost of goods sold. The final result of this report is net income. Business owners are interested in the company’s net income since it represents the amount of capital generated from business operations.
Employees are the individuals who alter economic resources into valuable consumer goods or services. Employees can be interested in a company’s financial information for some reasons. Companies may compromise contributions to an employee’s retirement account; the income statement generally lists the