Functions of accounting

From CEOpedia | Management online

Accounting has many important functions to fulfil. The basic one can include information, control, analytical and stimulation functions. Due to the criterion of the recipient of information created by accounting, the internal and external functions are distinguished. The literature also provides other accounting measures such as billing, evidential, statistical (providing information and statistical data) or stimulus. All accounting functions are performed simultaneously. They lead to effective use of resources and proper execution of tasks by economic entities.

Internal and external functions of accounting

The internal accounting function consists in providing information for the organization and management needs. Information in the form of reports and reports are directed to managers, i.e. managers, management board, shareholders or supervisory board as well as employees and employee organizations. The external function, on the other hand, is to provide information to external users such as: banks, investors, tax offices, administrative authorities, and cooperating companies.

Informative and analytical function of accounting

The informative accounting function consists in providing information for making decisions to internal or external recipients in the decision-making process. The information the recipient of which is the management board should be adjusted in terms of content and scope to the management needs, accounting is involved in the process of managing the entity, enabling the achievement of favorable financial results. It is also an important source of information for banks, tax offices, investors, employee organizations on financial results, its property and capital resources. Information obtained by statistical offices is the basis for calculations on the national economy scale. Therefore, information about the appropriate level of detail should also be provided in a timely manner. Sources of information for internal and external recipients are presented in the accounting books (with the consent of the manager or on the basis of specific provisions) and in financial statements (aggregate form.) Information about the entity contained in them is publicly available, general, fragmented or detailed, showing the results the activity of the unit.

Control function of accounting

The control function of accounting consists in protection of property against misappropriation and destruction. It favors the rational use of resources and prevents wastage. The control function has two aspects: passive and active. The passive aspect is to protect property against theft and destruction. Such property protection is possible thanks to the law regulating the principles of emission, checking and archiving of documents. Archiving is important because it allows you to control the accounting of the unit, for example, by making an inventory from time to time. The active aspect, on the other hand, is influencing the course of business operations in a way that will allow to achieve the most effective results without wasting money. This involves not only participation in the decision-making process (management accounting), but also on revealing the perpetrators of loss or waste.

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