Purposes of Accounting System


Meaning of Accounting:
Accounting is a major means of helping managers of an organization, equity investors of an organization, potential equity investors, creditors and bond holders of an organization, potential creditors and bond holders of an organization, suppliers and customers of an organization and other stake holders to take decisions.

Accounting provides information for three major purposes:
1. External Reporting: These reports are used investors, creditors, government authorities, and other outside parties.

2. Routine Internal Reporting: These reports which are periodically generated are used by managers of the company for their internal decisions.

3. Nonroutine Internal Reporting: This information or reports are generated to support projects and other decisions that come up as the need arises from them.

While the reports are prepared in different formats and basic data is manipulated or summarized in various ways to facilitate decision making, there is one data base maintained by the accounting system that contains data in the form debits and credits to various accounts maintained in the accounting system. Accountants combine these data items in various ways to provide information to internal or external users.
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