Accounting in a very simple sense is maintaining a record of varied activities. Thus, Accounting is some things that are used almost by everyone in their daily lives. In our lifestyle, we maintain a record of varied transactions or activities. Given below are the main benefits of accounting.
Benefits of Accounting
Financial Results of Business: the most advantage of accounting is that it helps in determining internet results of a business in terms of profits or losses and divulges the financial status of the business at the top of an accounting period.
Organized and Systematic Records: It is beyond the human capacity to memorize a large number of business transactions. Accounting helps in recording such a large number of transactions in a well-organized manner which minimizes the probability of erroneous and faulty results.
Assistance to Management: Accounting helps the management in effective deciding, efficient control on cash management policies, preparing budget and forecasting, etc. by providing them with useful information in an organized
manner. Information that is provided by accounting helps the management in planning, controlling, and decision making.
Provides Comparative Study: Accounting helps in maintaining the financial data of a business in a systematic manner for each of the years. This enables the comparison of business performance of one year with another year and finding the reasons for the deviation between the two.
Determining the Tax Liability: a scientific record of business activities helps in ascertaining the tax liabilities of a business. Acts as Evidence: In case of disputes, a systematic record of business transactions can be produced as evidence in the court of law.
Helps in Selling the Business: just in case an individual decides to sell his/her business, then properly maintained accounts help in determining the acceptable price at the time of selling off business.
Helps in Obtaining Loans: Before granting a loan to a business enterprise, the banks and financial institutions are interested in knowing the profitability and stability of a business. This information is often easily fetched by properly maintained financial statements of the business.
Also, Read What is Accounting?