Chapter 2, Problem 1DQ

What are the purposes of the accounting system?

To determine

Identify the purpose of accounting systems.

Explanation of Solution

Corporation: A business concern where there is a separate legal entity and are owned by shareholders are classified as corporation. Transfer of ownership and raising funds are easy in this form of organization. No personal legal liability exists among the shareholders.

The purpose of accounting systems of the construction company may include:

• Processing the cash received and disbursed.
• Collection of data required to prepare financial statements.
• Collection of data required to file income tax and employment tax.
• Collection of data required to manage the company’s finances.