What is the primary purpose of accounting?

The primary purpose of accounting is to systematically record, report, and analyze financial transactions. This foundation allows businesses and organizations to keep track of their financial activities, ensuring that they can measure their economic performance and stability. By maintaining accurate financial records, stakeholders—including management, investors, and regulatory bodies—can understand the financial health of an organization, make informed decisions, and comply with legal requirements.

Moreover, accounting provides essential information that enables businesses to prepare financial statements, monitor cash flow, and assess profitability. This systematic approach to handling financial data also supports budgeting and forecasting efforts, which are crucial for strategic planning and resource allocation. Overall, the integrity and transparency of financial information derived from accounting practices are vital for maintaining trust with stakeholders and ensuring sound financial management.