What is the primary purpose of accounting?

The primary purpose of accounting is to record and report financial information. This involves systematically capturing financial transactions and summarizing them to provide a clear picture of a company’s financial performance and position. Accounting serves as the backbone of business decision-making, allowing stakeholders, including management, investors, and regulatory agencies, to understand the financial health of a business through well-organized financial statements. This process includes tracking revenues, expenses, assets, and liabilities, ensuring that all financial activities are documented accurately and transparently.

While managing cash flow, providing legal documentation, and creating marketing strategies are important business functions, they are not the core purpose of accounting. Effective cash flow management relies on financial information generated through accounting, legal documentation is often a byproduct of accounting practices, and marketing strategies may be informed by financial data, but they do not define the fundamental role of accounting itself. Thus, the essence of accounting lies in its ability to record and report financial information, making option C the most accurate reflection of its primary purpose.