What’s Your Financial Accounting Objective?
Financial accounting objectives varies due to many reasons. The type and scale of an organisation, its objectives, fluctuating market conditions, and the economy also impact accounting objectives. Generally, accounting helps the business to achieve its agendas by providing a consistent framework that can produce reliable financial information.
The primary objective of financial accounting is to maintain complete financial transparency and have a clear picture of the business’s financial situation. Other significant financial accounting objectives are relevance, reliability, recording, planning and decision.
Finding your financial accounting objective
1. Relevance
Accounting is done to produce relevant financial information that can be used by the company to analyse finances and develop smart future strategies. A financial statement produced as the result of accounting should be relevant and clear to the finance experts so that they can maintain a clear record. Moreover, investors also require such financial statements to make final decisions about investing in a company.
Large organisations usually ask accounting firms in Singapore to produce relevant accounting documents on a quarterly or annual basis. Whenever these reports are produced, they must be made relevant by providing the most recent information first because the end-users are mostly interested in that.
2. Reliability
It should go without saying that the accounting documents and information about any business must be reliable. If an organisation or accounting firm does not have reliable financial records, it cannot attract investors because accurate information is not available.
There are different methods of verifying financial statement to ensure the information is reliable. Companies that have outsourced their accounting services in Singapore do not have to worry about the reliability of the accounting process, however. Independent accountants verify all the financial statements, balance sheets, cash flow statements, and other documents to ensure the accuracy and reliability of the documents.
3. Recording
Undoubtedly, keeping a record of financial data, transactions, and the overall financial health of a company is a primary objective of financial accounting.
It is done to produce a systematic, comprehensive, precise, and permanent record of all transactions of a company that can be recovered and reviewed whenever required. Well-maintained, authentic, and relevant financial records are the backbone of any accounting system.
4. Planning
No matter how big your organisation is, planning and allocating resources is a fundamental step. Every business needs to plan the allocation of the company’s resources, such as cash, labour, materials, technology, and other equipment.
Budgeting is also done after a thorough analysis of the financial data to find out which resources are needed in various departments or even branches of an organisation.
Budgeting is a critical part of managerial accounting. Well-managed budgets allow a company to function smoothly and plan future strategies and needs by predicting business requirements and source allocation.
Budgeting also helps with successful communication between different departments of a large organisation. Hence, financial accounting is important for collecting financial data and creating effective business strategies and budget plans.
5. Decision
Most managers are required to make many decisions on a daily basis. These decisions are usually quite important and can affect the business in many ways.
However, the risk of making a wrong decision can be minimized if the organizations are able to refer to proper financial data and analysis. Financial accounting helps the managers and business owners in making good business decisions and creating policies that will make the company more productive and efficient.
The following are some of the management decisions that are based on financial accounting data:
- Making changes in the cost of products and services to earn maximum profit.
- Production of specific products in the case of resource shortage.
- Deciding whether a company needs a bailout or a loan.
- Making smart investment choices.
- Discontinuation of a product, if the financial analysis shows that it is under-performing.
In a Nutshell
The objectives of financial accounting discussed above remain rather the same for every organization, which needs reliable and relevant financial information for different types of decision making.
A company that relies on the financial accounting system will be able to compete in a competitive market condition and has high chances of becoming successful. For more information, feel free to get in touch with us.
