Objectives Of Financial Accounting

Since human memory is short, systematic recording of financial transactions that took place in the past is essential. Therefore, one important objective of financial is to maintain systematic and permanent records of the financial transactions in a set of books called journal and ledger.

The soundness of financial position of a firm ensures its survival and growth. Therefore financial accounting aims at revealing the soundness of its financial position by preparing the balance sheet.

Profit is the main motive of every business firm. That is the result of its operations carried on throughout a financial year. Therefore, another important objective of financial accounting is to ascertain the result of business operations in terms of profit or loss by preparing income statement of the firm.

4. Reporting Past Performance And Future Prospect

The shareholders of the firm want to ensure security and growth in the value of their investment. Therefore, financial accounting seeks to report to the shareholders about the firm’s past performances and future prospect.