Essay
Unit 5: P1-purpose of accounting for a business
- Module
- Unit 5
- Institution
- Birkbeck College (BBK)
Essay of 3 pages for the course Unit 5 at BBK
[Show more]
3 reviews
By: shanyhajcover • 7 year ago
By: skhan30 • 7 year ago
By: kellybailly4 • 8 year ago
By: Nishka • 8 year ago
Content preview
In this task, I will be describing the purpose of accounting for a business.Accounting can be defined as the skill or practice of maintaining accounts
and preparing reports. Accounting formally begun in the year 1492. Luca
Pacioli formalised accounting by introducing a textbook called ‘Summa de
arithmetica, geometria, proportioni et proportionalità’, which he used to
further develop concepts of accounting.
Book-keeping is defined as the process of recording in books of accounts
or on computers, the financial effects of business transactions.
The main purpose of accounting is to aid financial control and
management of a business. Accounting is vital for a business as it
enables them to monitor their transactions and check what is going in and
out. In other words, it helps to keep on track by knowing the financial
position as the accounts summarise whether the business is making a
profit or a loss. Therefore, it allows them to identify areas for
improvement easily.
Keeping accounts can also prove to be of utmost importance as it acts as
a vital piece of evidence to potential investors. That is, it allows them to
determine whether it will be worthwhile and fruitful to invest in that
particular business.
Regular and organised records can picture a sense of professionalism and
encourage investors to capitalise the business. If a business’s records are
poor and cluttered, it is very likely that investors will not be willing to put
their money at stake.
There are several financial documents which are used to assist in book-
keeping; purchase order, credit note, goods received note, remittance
note, cheque, delivery note, statement of account and invoice.
The day books, also known as prime books are also vital in the smooth
running of a business. They involve the; sales day book, sales return day
book, purchases day book, purchases return day book, journal, cash book
and petty cash book.
Ledgers (general, sales and purchases) are also important in the book-
keeping processes of a business. Transactions which are recorded in the
ledgers are then used to set up a trial balance, which is then used to
check the arithmetical accuracy of the ledgers and to extract the balance
sheet and the income statement. The extended trial balance also has a
great significance in accounting as it enables us to make adjustments
which were omitted in the normal one and is thus essential for accurate
final accounts. The income statement consists of useful information like
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Nishka. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £2.99. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
60434 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy revision notes and other study material for 14 years now
