Explain the advantages of accounting.
Explain the advantages of accounting.
The advantages of accounting are explained as follows:
(i) Replacement of Memory: It is not possible for any human being to remember all the transactions of business. Accounting has replaced the need of such sharp memory. All financial transactions are recorded in a systematic manner in the books of accounts so that there is no need to rely only on memory.
(ii) Planning: Accounting information is helpful in preparing business plans. The basis of post records and comparative study of financial statements future events may be estimated.
(iii) Decision Making: The accountant helps the management in decision making by providing the relevant information. Determining selling price, allowing discount and credit facility to regular customers, etc. are few of the important decisions.
(iv) Controlling: To make effective controlling actual performance is compared with the desired or planned targets. The actual data is supplied by accounting books, without that the controlling may not be possible.
(v) Provides information to interested parties: Accounting provides necesary information to various parties or groups like owners, creditors, management, employees, government, consumers, debtors.
(vi) Evidence in courts: When any matter relating to business is referred to the court of law, accounting records of business transactions are treated as satisfactory evidence. These are used in settling the disputes between parties.
(vii) Assessment of tax-liability: Business concerns have to pay sales tax, excise duty, income tax, etc. as per the government rules. Accounting books are the basis of conclusive proof of tax liability of the business.
(viii) Assessing the performance and financial position of the business: An statement of P & L discloses profit earned (or loss incurred) during a particular accounting period. Profit is a measurement of the performance of the business. A balance sheet states the financial position ofthe business on a particular data. Thus, accounting helps in assessing the performance and financial positions of the business.
The advantages of accounting are explained as follows:
(i) Replacement of Memory: It is not possible for any human being to remember all the transactions of business. Accounting has replaced the need of such sharp memory. All financial transactions are recorded in a systematic manner in the books of accounts so that there is no need to rely only on memory.
(ii) Planning: Accounting information is helpful in preparing business plans. The basis of post records and comparative study of financial statements future events may be estimated.
(iii) Decision Making: The accountant helps the management in decision making by providing the relevant information. Determining selling price, allowing discount and credit facility to regular customers, etc. are few of the important decisions.
(iv) Controlling: To make effective controlling actual performance is compared with the desired or planned targets. The actual data is supplied by accounting books, without that the controlling may not be possible.
(v) Provides information to interested parties: Accounting provides necesary information to various parties or groups like owners, creditors, management, employees, government, consumers, debtors.
(vi) Evidence in courts: When any matter relating to business is referred to the court of law, accounting records of business transactions are treated as satisfactory evidence. These are used in settling the disputes between parties.
(vii) Assessment of tax-liability: Business concerns have to pay sales tax, excise duty, income tax, etc. as per the government rules. Accounting books are the basis of conclusive proof of tax liability of the business.
(viii) Assessing the performance and financial position of the business: An statement of P & L discloses profit earned (or loss incurred) during a particular accounting period. Profit is a measurement of the performance of the business. A balance sheet states the financial position ofthe business on a particular data. Thus, accounting helps in assessing the performance and financial positions of the business.
