Accounting Functions in Organizations
In order to accomplish its main objective of communicating information to the users, accounting embraces the following functions.
Identifying: Identifying the trade transactions from the basis documents.
Recording: The subsequently function of accounting is to maintain a methodical record of all commerce transactions, which are recognized in an orderly manner, soon after their incidence in the journal or supplementary books.
Classifying: This is apprehensive with the categorization of the recorded trade transactions so as to group the transactions of related type at one place; i.e., in ledger accounts. In order to validate the mathematical accuracy of the accounts, trial balance is prepared.
Summarizing: The confidential information accessible from the trial balance is used to arrange profit and loss account and balance sheet in a way useful to the users of accounting information.
Analyzing: It establishes the connection between the items of the profit and loss account and the balance sheet. The reason of analyzing is to recognize the financial potency and weak spot of the business. It provides the foundation for understanding.
Interpreting: It is apprehensive with explaining the meaning and consequence of the connection so established by the analysis. Interpretation should be useful to the users, so as to facilitate them to take accurate decisions.
Communicating: The results obtained from the summarized, analyzed and interpreted information are communicated to the involved parties.