In this task I have been asked to describe the purpose of accounting for an organisation. The organisation I have chosen is Future Fashion. I will be describing the purpose of why it needs accounting.
Purpose of accounting
Accounting is recording a financial transaction which means actions by a business that involve money either going in or out the business for example making a sale or paying a bill. Accounting also means planned or actual use of figures to produce financial information.
Therefore future fashion should record their financial transactions and show what is coming into the business and what is going out of the business. This is so they have financial information which may come in use to them as future reference. Also they can use this information to see how much they are spending into the business and how much they are spending out of the business. It will also be a guideline to them to show them if they are doing well.
It is important that businesses keep their records accurate and up to date for them to run smoothly. The business owner must record all the money coming into the business from sales and all of the money going out such as expenses. If a business fail to do this it may find itself not chasing payments forgetting to pay bills. They may even get into serious trouble with HM Revenue and Customs which is a British government department for the collection of all types of taxes. If a business does not record its transactions correctly it cannot report its financial performance accurately and therefore tax payments may be wrong.