C1 - Purpose of Accounting

Question 1

What are the 5 purposes of accounting?

Answer 1

• Recording transactions
• Management
• Compliance
• Measuring performance
• Control

Question 2

What is the purpose of recording transactions?

Answer 2

To maintain up to date accounting systems and keep important receipts, expenses and transactions recorded.

(assists in making informed, efficient and precise decisions at any time)

Question 3

What is the purpose of management?

Answer 3

To provide vital information helping plans for future.

(allows to plan staffing levels, monitor stock levels and control costs)

Question 4

What is the purpose of compliance?

Answer 4

To make sure financial matters are being handled in accordance with laws and regulations.

(prevents fraud; records, verifies, reports value of assets, debts, liabilities, expenses)

Question 5

What is the purpose of measuring performance?

Answer 5

To know if business makes profit or losses.

(calculates sales revenue, gross profit, and net profit)

Question 6

What is the purpose of control due to accounting?

Answer 6

To take control of finance as it knows income and outgoings as transactions flag as being unusual, so it gets investigated.

(have clear picture of trade receivables and payables, and helps avoid fraud and ensures survival of business)