Professional Documents
Culture Documents
Class Workshop
Class Workshop
5. Purpose of Accounting
A. Describe the purpose of accounting.
All companies use accounting to report, track, execute and predict financial transactions.
The main functions of accounting are to store and analyze financial information and
oversee monetary transactions. Accounting is used to prepare financial statements for a
company's employees, leaders, and investors.
B. What does the accounting system do?
The intent of an accounting system is to record business transactions, summarize those
transactions into an aggregated form, and create reports that can be used by decision
makers to monitor, analyze, and improve operations.
B. What are the three important accounting assumptions and what does each mean?
The three main assumptions we will deal with are – going concern, consistency, and accrual
basis.
Going concern
This assumption is based on the principle that while making the financial statements of an
entity we will assume that the company has no plans of winding up in the near future.
Consistency
This assumption states that unless and until things are mentioned in the accounting policies,
procedures, standards, etc. Things that have been followed in accounting remains the same.
Accrual basis
Under this assumption, accounting transactions are recorded in the books of accounts when
they occur.
Sentences:
Sole proprietorship: In most cases, a home-based candle making business is simply a sole
proprietorship with no employees.
Partnership: The company is developing a new car in partnership with leading auto
manufacturers in Japan.
Corporation: Three companies were amalgamated into a corporation.
Business: Their publishing company is the best in the business.
Entrepreneur: My dad was a successful textiles entrepreneur and my mother helped with
my business.
Financial report: These fees brought in $2.37 million, according to the city's annual
financial report.
Merchandising: She is the company's director of merchandising.