Accounting Goals, Principles, and Technologies

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Table of Contents

Primary Objectives of Accounting
Importance of Accounting
Basic Terminologies of the Accounting Process
Accounting Principles
Ethics in the Accounting Practice
Role of Technology in the Accounting Process
References

Primary Objectives of Accounting

The primary purpose of accounting is to provide useful and detailed intelligence for those who want to use the information to make critical decisions. In other words, accounting help various individuals acquire necessary material information that aids them in their day-to-day investment decisions. Other objectives include Full Disclosure, which is a concept in financial accounting that requires release of all the facts that are material to financial statements.

This is because failure to avail them may lead to misleading information in the financial statements: statement of financial position and statement of financial performance. The material facts include all the receipts and other assisting evidence related materials. It is important especially when auditors come to vet the authenticity of the information. In fact, it makes it easy for auditors and government tax officers to trace the originality of the records in an organization (Hooper, Davey and Presscot, 2009).

Importance of Accounting

At the end of every fiscal year, accountants prepare financial statements. Thanks to the accounting process, the preparation of these statements made easy. Accounting helps managers make critical and sound decisions that may have a large impact to the organization as a whole. The third role of accounting, we find that it is a career disciple. Hence, it is a means of living hood. Thanks to accounting process, managers are able to calculate their returns after every fiscal year.

Basic Terminologies of the Accounting Process

The accounting process otherwise known by many as the process of financial reporting has some basic terminologies. These include:

Assets- they are items an entity owns. They act as its capital to be able to provide products and services.
Liabilities: these are the debts that a business entity owes the public in the event of service and goods provision.
Expenses: refers to the consumption of assets because of providing goods and services to clients.
Revenues: They are assets received because of provision of goods and services to clients.

Accounting Principles

The first principle is the historical cost principle. This principle mainly affects the statement of financial position. The historical cost principle encourages managers to present transactions in terms of their fair values on the financial statements. That is, the buying price of the asset and the amounts paid to obtain a liability. The implication of this is that, the statement of financial position can only show items at their cost price without taking into account the effects of inflation (Hooper et al. 2008).

The second principle is the matching principle. This principle provides a way of measuring profitability. The matching principle advocates for the comparison of revenues earned in a specific period with the costs of the same period. This principle mainly affects the statement of comprehensive income. The other principle provided for by (IAS1.27) is the principle of revenue recognition better known as accounting on accrual basis. This principle requires management to recognise revenues at the point where earning occurs and not the point where money is received.

The fourth principle is the objectivity principle. Here, an entity is required to prepare financial statements that are unbiased. The financial statements should be fair to the extent that, any third party contracted to review them, should come up with the exact same information. The fifth principle is the consistency principle (IAS 1.39). This principle requires entities to treat similar transactions and events in the same way in every accounting period.

Ethics in the Accounting Practice

Ethics is a field of study that tells an individual what to do and how to do it. It tells an individual the good and bad in our day-to-day activities.

In the accounting field, ethics guides accountants on what to include in the accounting process or the preparation of the accounting statements.

Role of Technology in the Accounting Process

Technology has played a key role in the accounting process. For instance, the debit and credit processes are now very easy. Evaluation of the transactions is now accurate and efficient. It thus enhances its effectiveness. It saves time. The accounting practice has really made an impact in my life as through it, I have learned to be responsible and in addition, it has taught me on how to be ethical let alone give back to the society (Drever, Santon and McGoan, 2007).

References

Drever, M. Santon, P. & McGoan, S. (2007). Contemporary Issues In Accounting. Australia: John Wiley.

Hooper, et al. (2008). Conceptual Issues in Accounting: A New Zealand Perspective. Melbourne: Cengage Learning.

Hooper, K. Davey, H. & Presscot, S. (2009). Conceptual Issues In Accounting:A New Zealand Perspective. Melbourne: Cengage Learning.

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