Purpose of accounting essays

Trial Balance only confirms that the total of all debit balances match the total of all credit balances. Trial balance totals may agree in spite of errors. An example would be an incorrect debit entry being offset by an equal credit entry. Likewise, a trial balance gives no proof that certain transactions have not been recorded at all because in such case, both debit and credit sides of a transaction would be omitted causing the trial balance totals to still agree. Types of accounting errors and their effect on trial balance are more fully discussed in the section on Suspense Accounts.

Companies also engage in various investing and financing activities that do not require the use of cash. Such activities are known as non-cash investing and financing activities . Sometime these activities have a significant impact on the future cash flows of the entity and therefore their disclosure to the users of financial statements becomes necessary.  For this purpose, a company that performs any significant non-cash investing and financing activity during the accounting period must disclose it either in the statement of cash flows or in the footnotes to the financial statements.

Purpose of accounting essays

purpose of accounting essays

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