Task 1 - The Purpose of Accounting
Definition of Accounting
The process or work of keeping financial accounts.
The purpose of accounting is to collect, prepare and analyse financial data relating to a
firms performance. An example of this is Tesco’s tills that scan all day long which
produces data. This data can then be used by companies to see what their figures are
looking like and what they could do to improve on this. By monitoring data and activity
from till points can reduce the amount of stock loss or potential risks they have. Risks
could include not keeping correct information to do with suppliers and banks which could
impact their relationship with these companies and could also get them into legal issues.
Accounting is also required inside an organisation would be because it reveals profit for a
given period. An organisation would need to check regularly how they are doing against
budget and figures. Organisations would need to keep track of what goes in and out of
their figures and this would include things they own (assets) or any loans or finance
agreements.
The two main types of accounting are Financial and Management. Financial Accounting
is mainly for people outside of an organisation such as shareholders or lenders, in order
to see the financial statement for the business. Management Accounting provides
information that is used by managers in order to help the general activity going on inside
the organisation and it can also help employees to cooperate better.
Historical Data is information that shows activity and trends from a company past. This
type of information can be helpful when predict the future and success of a company as
they have something to work towards and it can give them a good basis in regards to
budgets and targets.
Capital income is the money that a business starts with in order to start a new business
or expand an existing one. Sole traders would find capital income difficult as all the
money would be out of their own savings. However; a partnership would find it easier to
fund their organisation as they have each other’s savings.
Revenue income is money made by an organisation as a result of its day to day
operations. This would mainly be the profit from goods or services. This could be in the
form of cash or card payment from customers.
Capital expenditure is money used to purchase, upgrade or extend the life of long term
assets. This includes things such as land, building, equipment, vehicles, fixtures and
more.
Definition of Accounting
The process or work of keeping financial accounts.
The purpose of accounting is to collect, prepare and analyse financial data relating to a
firms performance. An example of this is Tesco’s tills that scan all day long which
produces data. This data can then be used by companies to see what their figures are
looking like and what they could do to improve on this. By monitoring data and activity
from till points can reduce the amount of stock loss or potential risks they have. Risks
could include not keeping correct information to do with suppliers and banks which could
impact their relationship with these companies and could also get them into legal issues.
Accounting is also required inside an organisation would be because it reveals profit for a
given period. An organisation would need to check regularly how they are doing against
budget and figures. Organisations would need to keep track of what goes in and out of
their figures and this would include things they own (assets) or any loans or finance
agreements.
The two main types of accounting are Financial and Management. Financial Accounting
is mainly for people outside of an organisation such as shareholders or lenders, in order
to see the financial statement for the business. Management Accounting provides
information that is used by managers in order to help the general activity going on inside
the organisation and it can also help employees to cooperate better.
Historical Data is information that shows activity and trends from a company past. This
type of information can be helpful when predict the future and success of a company as
they have something to work towards and it can give them a good basis in regards to
budgets and targets.
Capital income is the money that a business starts with in order to start a new business
or expand an existing one. Sole traders would find capital income difficult as all the
money would be out of their own savings. However; a partnership would find it easier to
fund their organisation as they have each other’s savings.
Revenue income is money made by an organisation as a result of its day to day
operations. This would mainly be the profit from goods or services. This could be in the
form of cash or card payment from customers.
Capital expenditure is money used to purchase, upgrade or extend the life of long term
assets. This includes things such as land, building, equipment, vehicles, fixtures and
more.
