Purpose Of Accounting

Question 1

What are the 5 purposes of accounting

Answer 1

Recording transactions
Management of business
Compliance
Measuring performance
Control

Question 2

Tell me about recording transactions
(Eg taxes and sales invoices)

Answer 2

Accountants record money in and out
Payments are tracked
Ensures bills and taxes are paid on time

Question 3

Tell me about management of business
(Manager is responsible for..)

Answer 3

Planning- foresee likely financial commitments
Monitoring- check performance and spending
Controlling - ensure sufficient funds

Question 4

Tell me about compliance
(Preventing fraud, compliance with law and regulations)

Answer 4

HMRC compliance with corporation tax, VAT and employee payroll
Compliance with financial reporting

Question 5

Tell me about measuring performance

Answer 5

Accountants look at:
Gross and net profit
Sales revenue
Expenditure

Question 6

Tell me about control

Answer 6

Trade receivables — money owed to the business
Trade payables - money owed by the business