Advantages of Accounting

• Maintenance of business records

It records all the financial transaction pertaining to the respective year systematically in the books of accounts. It is not possible for management to remember each and every transaction for a long time due to their size and complexities.

• Preparation of financial statements

Financial statements like Trading and profit and loss account, Balance Sheet can be prepared easily if there is a proper recording of transactions. Proper recording of all the financial transactions are very important for the preparation of financial statements of the entity.

• Comparison of results

It facilitates the comparison of the financial results of one year with another year easily. Also, the management can analyze the systematic recording of all the financial transactions according to the policies of the entity.

• Decision making

Decision making becomes easier for management if there is a proper recording of financial transactions. Accounting information enables management to plan its future activities, make budgets, and coordination of various activities in various departments.

• Evidence in legal matters

The proper and systematic records of the financial transactions act as evidence in the court of law.

• Provides information to related parties

It makes the financial information of the organization available to stakeholders like owners, creditors, employees, customers, government etc. easily.

• Helps in taxation matters

Various tax authorities like income tax, indirect taxes depend on the accounts maintained by the management for settlement of taxation matters.

• Valuation of business

For proper valuation of an entity’s business accounting information can be utilized. Thus, it helps in measuring the value of the entity by using the accounting information in the case of the sale of the entity.

• Replacement of memory

Proper recording of accounting transactions replaces the need to remember transactions.

Blog Ref: CAclubIndia