The following are the main objectives of accounting:

  1. To maintain permanent records of the financial transactions.
  2. To ascertain the amount of profit or loss of the business during a period.
  3. To provide information to the tax authorities for determining the amount of tax liability.
  4. To disclose true financial position of the business on a particular date.
  5. To communicate the information the information relating to operating results and financial position of the business to all concerned parties.

Accounting is broader than book keeping. Book keeping is a part of accounting. Book keeping is concerned only with the systematic record of financial transactions but accounting is concerned with the act of recording, classifying and summarizing the financial transactions of a business to know its profit or loss and financial position. It is also concerned with the act of communicating the operating results and financial position to all concerned parties of the business.The following are some of the main definitions of accounting:

According to R. N. Anthony, "An accounting system is a means of collecting, summarizing, analyzing and reporting in monetary terms, information about the business."

According to Lewis and Gillespie, "Accounting may be seen as consisting of recording, classification, presentation and interpretation of financial information."

From the above definition, it is clear that accounting is concerned with the act of recording, classifying and summarizing the financial transactions of a business to know the operating results and financial position and communicating such operating results and financial position to all concerned parties.

The rule for debit and credit for various types of accounts are as follows:

Accounts

Rule for Debit

Rule for Credit

Personal account

The receiver

The giver

Real account

What comes in

What goes out

Nominal account

All expenses and losses

All incomes and profits