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14 Benefits of Accounting

14 Benefits of Accounting



The foremost objective of maintaining books of accounts is to get information about the financial position of the business.

Here are a few basic advantages of accounting

  1. Maintenance of permanent Business records
    Basically business will have a huge number of transactions. It helps in recording all the financial transactions on that respective financial year.
  2. A systematic order
    Accounting is a systematic way of presenting business transactions in books of accounts. It is a complete and systematic representation of business transactions. Accounting keeps a record and analysis of every business transaction.
  3. Decision making
    The main function of management is decision-making. Accounting helps the management to make better decisions to selling price, deduction of cost, increase in sales, etc.
  4. Valuation of business
    True and fair valuation of the business is calculated. Accounting helps in attaining the correct picture depicted in the balance sheet and this is used to determine the purchase price.
  5. Helps in Raising loans
    Business owners take loans when they want to expand their business. Financial institutions provide loans based on the profitability of the business. This can be measured by having a look at the accounts of the company.
  6. Evidence in court
    All business transactions are recorded in the books and these can be used as evidence in the court of law.
  7. Complying with law
    When you set up a business, you will have to deal with various government departments like income tax, GST, etc. Accounting helps in the filing of various returns with these departments.
  8. Preparation of Financial statements
    If there is a proper recording of transactions maintained, Financial statements like Trading and Profit & loss account, Balance Sheets can be prepared easily.
  9. Comparison of Results
    It helps in analyzing the financial results of the entity by having the comparison of one year to another year.
  10. Audits
    An audit certificate is issued by the auditor on the accounts which proves that there are no irregularities in the organization.
  11. Effective management
    Accounting gives proper feedback to the management about the financial status of the organization. This helps the management make better business decisions and also helps in controlling different activities of the business. The performance of the business can also be determined with proper accounting.
  12. Cost control
    It helps in identifying and reducing business expenses to increase profits which helps in the budgeting process.
  13.  Inter and Intra comparison
    Comparison of accounts made between two different firms for the same period is called intercomparison of accounts. The comparison made between two different periods for the same firm is called intra comparison. The performance of the business is compared and goals and shortcomings can be predetermined.
  14.  Prevention of Frauds, errors, and forgery
    It helps in taking timely steps for the prevention and detection of fraud.

Conclusion

Accounting helps in the overall growth of the business and helps in keeping track of the financial transactions of the business. Accounting is the best way to systematically analyze the growth, goals, and shortcomings of a business.

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