Basic Purpose of Accounting

The basic purpose of accounting is derivation of information. The double entry system of accounting enables an organisation to derive the information that it needs in relation to accounting elements called account heads or ledger accounts. This double entry system of accounting, enables the collection of all the information relating to an element (account) at a single place.
For example

• To know the value of Furniture with the organisation a "Furniture a/c" is maintained.
• ...
• ...
• To know the amount of expenditure incurred on account of salaries a "Salaries a/c" is maintained.
• ...

The organisation's informational need defines the elements in the accounting system of the organisation. The more the information needed by the organisation the more the elements (accounting heads) that are to be maintained by the organisations'.