Tasks of Accounting

The accounting of a company fulfills several important tasks. The most important is the provision of information to various stakeholders about the asset, income, and financial situation of a company.

Modern accounting essentially reflects the asset, income, and financial situation of a company and thus fulfills an essential information function. The compilation of assets and liabilities in the balance sheet reflects the asset situation. The income statement provides insight into the income situation through revenues and expenses. Cash flows are summarized in the cash flow statement and provide information about the financial situation of the company. Other important tasks and functions of accounting include:

• Planning Function: Companies set strategic goals, which are recorded in action plans and achieved through strategic use of resources. Accounting allows these plans to be recorded, thus capturing the economic consequences.
• Decision and Control Function: Companies make a multitude of decisions daily to achieve their strategic and operational goals. Accounting serves as an important management tool, e.g., when purchasing new machines, tendering for new positions, or evaluating projects.
• Basis for Tax Calculation: The calculation of the annual tax scope is based on financial information about the company. Essential information is provided, in particular, by the balance sheet (capital tax) and the income statement (profit tax).
• Informing the Public: Internationally active companies must regularly (quarterly reports) inform the public about their business development. This is usually done through extensive financial reports based on accounting.
• Control Function: Internal company processes (e.g., production decisions) are continuously analyzed and monitored to initiate countermeasures in case of deviations. This is mainly achieved through a continuous actual-to-planned comparison.
• Creditor Protection: The capital of companies comes either from internal capital providers (e.g., shareholders, partners, cooperative members) or from third parties such as banks or investors. Legislation protects external capital providers and their loans with a series of measures, mainly through the obligation to regularly inform about the asset, income, and financial situation.

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