Accounting and its purpose and function in business

 2 Accounting and its purpose and function in business

Accounting is the process of recording, processing, checking, analyzing, and providing economic and financial information in the form of value. Or it can be understood that accounting is the measurement, processing, and transmission of financial and non-financial information about economic entities. structured, the purpose of accounting, in addition to providing information, is also to provide financial management and support businesses in making decisions in compliance with the law (Weetman, 2019).

Therefore, accounting for an organization is a tool that helps ensure effective operations in compliance with business laws. Correctly assess the accounting purpose of a business helps increase efficiency, save costs, thereby increasing profits and protecting business assets (Weetman, 2019).

2.1 Scope of accounting

The scope of accounting is the range of activities and functions that the accounting discipline encompasses, which can be understood as a series of activities including collecting, organizing, classifying, summarizing, analyzing and decoding data. financial documents, thereby providing structure and clarity in the accounting industry (Jayachandran, 2023).

The scope of accounting provides the ability to make decisions about the most beneficial and best directions for the business in addition to analyzing performance through managing and regulating the business's financial resources. Besides, it helps businesses manage risks to avoid financial risks through appropriate methods based on collected information (Jayachandran, 2023).

But besides that, the scope of accounting also has some limitations, such as subjectivity when making judgments, estimates and assumptions that can affect the accuracy of financial data. Besides, accounting only considers transactions that can be quantified or measured in money, so it can ignore non-financial factors such as customer satisfaction or employee morale. that affects the overall performance and value of the business (Jayachandran, 2023).

2.2 The function of accounting in the context of regulatory and ethical constraints

As mentioned above, accounting plays an important role in businesses by providing accurate and transparent information to the organization. In an environment with many constraints on ethical regulations, businesses will have difficulty assessing and handling ethical violations. Therefore, the legal requirements of the industry always emphasize accuracy and transparency, as well as always comply with accounting principles and standards such as the Accounting Law or Vietnam Accounting Standards System (VAS) (Maclay, 2017).

For accountants, they must always ensure basic ethical principles such as integrity, integrity, professional competence... Besides, meeting specific ethical requirements listed in the Accounting Law and Vietnam Accounting Standards System (Maclay, 2017).

2.3 Accounting Systems and the Role of Technology in Modern Accounting

An accounting system is a platform that facilitates the recording, processing, storage, and dissemination of financial data within an organization. This system is pivotal in ensuring the transparency of information and the operational efficiency of financial transactions. Historically, accounting systems were predominantly manual, relying on 'ledgers' that were prone to errors and time-consuming for businesses (Maziyar, 2011).

Currently, with the rapid development of modern technology, automatic accounting software has been launched and has revolutionized the way the accounting system operates, turning accounting into a highly specialized function. more effective and more accurate. It can be mentioned that AI or Blockchain technology is applied in accounting software (Maziyar, 2011).