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Maintaining systematic records:

This is the basic function of accounting business transaction are properly recorded, classified under appropriate accounts and summarized into financial statements – income statement and the balance sheet.

Communicating the financial statements:

Accounting has been regarded as a language of the business. As the primary aim of a language is to serve as a means of communicating, accounting is used to communicate financial information in respect of net profits, assets, liabilities etc., to the interested parties.

Meeting legal needs:

The provisions of various laws such as Companies Act, Income Tax and Sales tax Acts require the submission of various statements i.e., annual accounts, income tax returns, returns for sales tax purposes and so on.

Protecting business assets:

Accounting maintain proper record of various assets and thus enables the management to exercise proper control over them with the help of following information regarding them: (i) How much is the balance of cash in hand? (ii) What is the position of bank balance? (iii) What is the position of inventories? (iv) How much money is owed by the customer? (v) How much money is owing to the creditors? (vi) What is the position of various fixed assets and how these are being used? The latest information in respect of these matters is of great help to the owners and management to ensure that no asset is unnecessarily wasted. it may be noted that these functions are those of financial accounting alone. The other branches of accounting have their special functions with the common objective of assisting the management in its task of planning, control and coordination of business activities.

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