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(4) Classifying the transactions

Transactions recorded in the books of original entry – Journal or Subsidiary
books are classified and grouped according to nature and posted in
separate accounts known as ‘Ledger Accounts’.
(5) Summarising the transactions
It involves presenting the classified data in a manner and in the form of
statements, which are understandable by the users.
(6) Analysing and interpreting financial data
Results of the business are analyzed and interpreted so that users of

financial statements can make a meaningful and sound judgment.
(7) Communicating the financial data or reports to the users
Communicating the financial data to the users on time is the final step of
Accounting so that they can make appropriate decisions.

Objectives of Accounting

1. To maintain a systematic record of business transactions: Accounting is used
to maintain a systematic record of all the financial transactions in a book of
accounts.
2. To ascertain profit and loss: To check whether the business has earned profits
or incurred losses, we prepare a “Profit & Loss Account”.
3. To determine the financial position: Another important objective is to

determine the financial position of the business to check the value of assets
and liabilities. For this purpose, we prepare a “Balance Sheet”.
4. To provide information to various users: Providing information to the various
interested parties or stakeholders is one of the most important objectives of
accounting.
5. To assist the management: By analysing financial data and providing
interpretations in the form of reports, accounting assists management in

handling business operations effectively

Advantages of Accounting

1. Provide information about financial performance: Accounting provides factual
information about financial performance during a given period of time. Like, profit