Understand the major purposes of accounting and its implications in business environment.

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2. Purposes of
Accounting

3. SCORE KEEPING
The score keeping function is one of the primary
purposes of accounting information. It basically deals
with the financial health of the enterprise. In other
words, it answers: How are we doing ? Good , bad,
or indifferent? Though it appears to be a simple
question, a moment's reflection will show that it is
not that simple.
It involves answering questions such as : What is
doing good? What is doing bad? Is profit earned
good? If so, how much? Is it that profit alone is not
sufficient?

4. ATTENTION DIRECTING
Attention-directing is nothing but the process of giving a
signal to the user of accounting information about the need
to take a decision. As such the accounting information
supplied arouses the user's attention to take a decision.
For example, a report from an accountant comparing the
actual performance data against budget data is a score-
keeping record. In the hands of a decision-maker it is an
attention-directing information. This would enable him to
immediately focus his attention on the deviations or
variances from the budgets or the plans.

5. PROBLEM SOLVING
The problem-solving function of accounting information
involves provision of such information which enables the
manager to find solutions to the problems. There are many
problems which accounting information could highlight and
provide for their possible solutions, such as make or buy
decision with respect to component, parts or products,
continue or drop decisions with respect to product lines
leasing or acquisition decisions with respect to assets etc.

6. Profit and cash balance distinguished
How do we evaluate the results of a firm ? The answers could
be many depending on what your interests are. But there is
no difference of opinion regarding two important aspects.
1.What is the worth of the business?
2.How much does it earn?
The results of-these two inquiries usually become the basis for
several decision of the management and their action plans.
The initiatives the management takes in connection with
improving the profitability of the enterprise and its worth will,
in a large measure, be a reflection of managerial
effectiveness.

8. SUMMARY
Accounting, in its score card role, accumulates data and
enables interested persons, both internal and external, to
understand and take stock of the organisation's
performance. In its attention-directing role accounting
information, by reporting and analysing the data, focuses a
manager's attention on operational deficiencies,
weaknesses, threats -and opportunities. In this role
accounting complements day to day operational planning
and control activities. In its problem-solving role,
accounting enables quantification of the different
alternative solutions, their relative merits and demerits.