Let us know, as to, What are the top 10 advantages (benefits) of accounting? This helps us to know the importance and uses of accounting for our business and real life.
What is Accounting? Its Meaning, Definition & Scope:
Financial Accounting is the art of recording and reporting financial transactions in the books of accounts using financial statements. The main objective is to maintain a systematic record of business transactions of a business entity to evaluate the financial performance & position for a year and to communicate the results to the users of financial statements.
It is the art of recording, summarizing, analyzing, and reporting business transactions of the enterprises by Financial Statements. These statements include the income statement, balance sheet, and cash flow statement
In 1966, American Accounting Association defined it as, "the process of identifying, measuring, communicating financial information to permit judgements and decisions by users of accounts."
Accountancy refers to a systematic knowledge of accounting. It tells us how to prepare the books of accounts and how to summarize the accounting information to communicate it to the users of information. The users are creditors or suppliers of raw materials and finished goods, debtors or customers, investors, employees, tax authorities to levy a tax, management to take useful decisions, government and their agencies, and the general public. The users are interested in the performance or profit or loss of a business entity.
What are the top 10 advantages, benefits, uses of Accounting?
Let us now discuss the advantages and uses of Accounting which are listed below. These benefits and advantages help us to know the financial performance & position of the business enterprise and also helps in decision making.
1. Permanent record & maintenance of Business Transactions
2. Provides information to Users & Stakeholders
3. Assists in Preparation of Financial Statements
4. Depicts the Financial performance & position of business entity
5. Comparision of Financial Results of business entities
6. Assists in Legal Compliance & Taxation matters
7. Assists in Decision Making
8. Assists in Valuation of Business Entity
9. Assists in performing Audit of Business Entity
10. Prevention & detection of frauds, errors, forgery
Conclusion
Thus, Accounting helps in recording business transactions, maintenance of books of accounts, depicting financial performance & position of business entity, communicating the results to users like debtors, creditors, shareholders, investors, government and helps in decision making as well.
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