Given below are the 10 Advantages Of Accounting.
Following are the main advantages of accounting:
1. Replacement of memory. In a large business is very difficult for a businessman to remember all the transactions. Accounting provides records that will furnish information as and when desired and thus it replaces human memory.
2. Evidence in court. Property maintainer accounting is often treated as good evidence in the court to settle a dispute.
3. Settlement of taxation liability. If accounts are properly maintained, it will be of great assistance to the businessman in setting the income tax and sale tax liability otherwise tax authorities may impose any amount of tax that the businessman will have to pay.
4. Comparative study. It provides the facility of a comparative study of the various aspects of the business such as profits, sales, expenses, etc. with that of the previous year. It helps the businessman to locate significant factors leading to the change if any.
5. Sale of business. If accounts are correctly maintained, it helps to ascertain the proper purchase price in case the businessman is interested to sell his business.
6. Assistance to the insolvent person. If a person is maintaining proper accounts and unfortunately he becomes insolvent(i.e. when he is unable to pay his creditors), he can explain many things about the past with the help of accounts and can start a fresh life.
7. Assistance to various parties. It provides information to various parties, i.e., owners, creditors, investors, government, managers, research scholars, the public, and employees, and the financial position of a business enterprise from their own viewpoint.
8. Facilitates raisin loans. Accounting facilitates raising loans from lenders by providing them with the required financial information.
9. Assistance to the management. Accounting assists the management in taking managerial decisions. For example, the Projected Cash Flow Statement facilitates the management to know the future receipts and payments and to take decisions regarding anticipated surplus or shortage of funds.
10. Facilitate control over assets. Accounting facilitates control over assets by providing information regarding cash Balance, Bank Balance, Stock, Debtors, Fixed Assets, etc.
