Need For Accounting

Accounting is basically concerned with the monetary transactions of a firm.An entrepreneur who invests money in a business organisation would like to know whether his firm made profit or incurred loss at the end of the year.A firm whether small or big deals with many customers,suppliers etc.

An entrepreneur has to record thousands of transactions which is relating to purchase and sales of goods either on a cash basis or a credit basis,payment of other expenses such as rent, electricity bill,salary of employees,payment of raw materials etc.It is very difficult to remember all the transactions of a firm.

Here,need for accounting arises to record all these transactions on time so as to get the relevant information without any difficulty.Similarly,non business organisation like educational institutions,hospitals etc records transactions which are monetary in nature.Accounting helps in maintaining systematic and permanent records of business transactions.

Also, accounting can be used for decision making.Financial information which is presented in the form statement of profit and loss account,balance sheet which will be useful to a number of outsiders such as investors,creditors,employees etc for decisions relating to a business organisation.However,accounting is mandatory for a firm.

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