what is advantage of accounting

Benefits of Accounting

The given below are the various benefits of accounting.

1. Financial Results of Business- The main advantage of accounting is that it provides the net results of business in terms of profits or losses and reveals the financial status of the business at the end of a period.
2. Organised and Systematic Records- It is beyond the human capacities to memorise a large number of business transactions. Accounting helps in recording such a large number of transactions in a well organised manner which minimises the probability of erroneous and faulty results.
3. Assist Management- Accounting helps the management in effective decision making, efficient control on cash management policies, preparing budget and forecasting, etc. by providing them the useful information in an organised manner.
4. Provides Comparative Study- Accounting helps in maintaining the financial data of business in a systematic manner for each of the year. This enables the comparison of business performance of one year with another year and finding the reasons of deviation between the two.
5. Determining the Tax Liability- A systematic record of business activities helps in ascertaining the tax liabilities of business.
6. Produce as Evidence- In the cases of disputes, systematic record of business transactions can be produce as evidence in the court of law.
7. Helps in Selling the Business- In case a person decided to sell his/her business, the properly maintained accounts helps in determining the suitable price at the time of selling of business.
8. Helps in Obtaining Loans- Before providing loan to a business enterprise, the banks and financial institutions are interested in knowing the profitability and stability of business. This information can be easily fetched by properly maintained financial statements of the business.