The advantages of accounting are explained below:-
- Accessing the performance of the business
Accounting keeps a proper and systematic record of all business transactions. The income statement is prepared with these records and we are able to know the profit earned and the loss suffered by the business.
- Documentary evidence
Accounting records can be used as an evidence in the court to substantiate the claim of the business. These records are based on documentary proof. In this way, the court accepts these records as evidence.
- Facilitating the sale of the business
The position statement of the business shows the value of assets and liabilities of the business. Accounting facilities in the calculation of the consideration for which the business should be sold.
Any three objectives of accounting are:
- To analyze and interpret the financial information
It analyzes and interprets the result of the business to draw conclusions with the help of such conclusions the parties concerned in the business can have full information about its profitability and financial position.
- To help in determination of tax liability
Business has to pay different types of tax to the government. It provides the financial information to tax authorities to determine tax liability.
- To depict the financial position
A concern, whether trading or non-trading should know it’s true financial positions. For this purpose, it prepares a balance sheet at the end of every year which informs about its positions of assets, liabilities and capital and reflects the economic strength and weaknesses of the business.