Top 10 Uses of Accounting

In this blog we will learn the uses of accounting and also discuss the main uses of accounting. Read this blog till the end..

In this blog we will learn the use of accounting. The main objective of accounting is to deposit and report on financial information about cash flow, performance and financial condition of the business. The development of any business is possible if we record and analyze all business transactions correctly. The following are the main uses of accounting.

  1. Avoidance of the limitation the memorizing power 
  2. Compliance of the statutory provisions 
  3. Identification of profit and loss of business
  4. Ascertainment of the financial position of the business.
  5. Assessment of the tax
  6. Knowledge of the debtors and the creditors 
  7. Determination of the sales price of the business 
  8. Evidence in the court of the law
  9. Assistance in taking a managerial decision 
  10. Development of the nation.

Avoidance of the limitation of the memorizing power

Generally, accounting is used for business purposes or for easy to remember data. For a trader, it is not possible to remember all transactions due to the limitations of human memory. Accounting is helpful in recording all transactions, and when a merchant checks the record, he can easily remember it and use it as his business purpose.

Compliance of the statutory provisions

If we look at from an accounting point of view, recording transactions is mandatory in any business and all statutory provisions are met with the help of accounting. In simple language, it is very important to keep a record of all the money. India, it is mandatory for joint stock companies to record all cash, purchases and sales.

Identification of profit and loss of business 

If one starts his business, his purpose is to make a profit in his business. Any business has only two results: profit and loss. The business does not decide what time the profit will be and what time the loss. But for correct calculations in the business of profit and loss, it is necessary to record correctly by adopting the principles of accounting.

Ascertainment of the financial position of the business

Financial statements, on a specific date, are knowledge of the liabilities and liabilities of the assets by the company. Assets mean all sources of trade and liabilities means the amount of all bills payable. Financial position can be calculated by business if the businessman records all assets and liabilities in accounting.

Assessment of the tax

Nowadays, there are a lot of business taxes that a trader has to pay. Tax, such as income tax, sales tax, property tax, excise duty, customs duty and import duty, etc., is possible only if the business accurately records its income, production and sales with the help of accounting. But if the record is not properly created by the businessman, the officer who checks the records of taxes is the assessing officer. The assessing officer calculates the amount of tax with his estimate.

Knowledge of the debtors and creditors

A practitioner can get all the information about the amount with the help of accounting. Like all knowledge of debtors and creditors. A trader can easily find out the amount pending on behalf of the debtor and it is easy to know how much amount he has to pay to his creditors. And this is possible only if the businessman manages his accounts record properly. And with the help of accounting, we can do it very easily.

Determination of the sales price of the business

If a businessman wants to sell his active business to a third party, he or she should know the selling price of that active business. He will be able to tell his selling price only if he has maintained his record well. If the businessman records the investment correctly, the sales prices of the active business can be determined.

Evidence in the court of law 

If there is a debate between any two parties in future. At that time, the court asks for evidence. Account records will work as proof at that time. And before the court, the accounts that remain properly recorded will act like proof for the court, and the court accepts account transactions with evidence. Therefore, it is necessary for a businessman to maintain his company's record properly and keep his account records clear.

 Assistance in taking a managerial decision 

Accounting is very helpful in making managerial decisions. Accounting helps in making many managerial decisions such as calculating the price of goods and services, calculating product mix and sales mix, purchase decisions, different use of plants, determining the productivity of different sources of presentations, continuing and closing business decisions, changing machinery decisions, decisions about acceptance of a specific order , decisions on tenders etc.

Development of the nation

A nation can develop with the help of accounting. Accounting can develop the nation when a businessman creates his own record properly. When the businessman creates his record properly, it means he cannot save the money that is called black money. It simply means that they cannot steal the tax which they have to give to the government. If the businessman cannot steal tax, it means that he will have to pay tax to the government and the government can use this tax money for the development of the nation. If the businessman pays his tax in full honesty and time, the country will grow.

Conclusion

Now you have seen all important uses of accounting and we believe all of you understand the uses of accounting.

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