In this blog, we are going to tell you some important uses of accounting which are very useful for you. There are so many uses of accounting, and there are the following main uses of accounting.
Avoidance of the limitation of memorizing power
Normally the accounting is used for business purposes or for remembering the records easily. To remember all the business transactions it is very difficult to remember all the things for any businessman. And we can say that it is impossible to remember all the things for any businessman or for any other people it is not possible to remember things, it is because of the human memory limitation. To record all the transactions accounting is very helpful, whenever the businessman wants to check the records, he can check that records easily.
Compliance of Statutory provisions
In the business, the recording of transactions is a must from the accounting point of view. And all the statutory provisions are fulfilled by the help of the accounting. In simple language, we can say that it is very important to make the records of all the cash. And also in the companies which are the joint-stock companies, the purchase transaction, and the sale transaction must be recorded.
Ascertainment of profit and loss of the business
Any person who starts its business they want to get or want to earn profit in their business. Earning profit is the main purpose of any business which is started. In any business, there are two clear results in any business that is the profit or loss. This is not fixed in any business that there is every time profit or loss. But for any business to get the correct business profit or loss calculation, it is must to record correctly by adopting the accounting principles.
Ascertainment of the financial position of the business
From the financial statement, at a specific date, the knowledge of the assets of the company and its liabilities are found by the company. And the meaning of the assets is all the business sources and the meaning of the liabilities is the payable business amount. In any business, it is very important to calculate the correct financial position. Therefore it is a must for the businessman that he should have all assets and the liabilities records in accounting to get the accurate calculation of the financial position.
Assessment of Tax
Nowadays there are so many taxes which a businessman has to pay. And the taxes which a businessman has to pay are like income tax, property tax, sale tax, import duty tax, excise duty tax, customs duty tax, etc. If the businessman makes accurately records its production, sale, and income then the accurate calculation is possible only. And it is a must for the businessman to pay all these taxes properly. But if the record is not made properly by businessman then the officers which check the records of the taxes of all businessman. And the officer which checks the record of the taxes is the assessing officer. Accessing officer calculates the amount of tax with his own estimation.
Knowledge of Debtors and Creditors
Now the businessman, with the help of accounting, can easily find all about the amount. Like all the knowledge of debtors and creditors. From the debtors what amount is pending can be easily found by the businessman. And to creditors, how much amount is paid can be easily found by the businessman. All this possible, only if the accounting records are maintained properly. So it is so vital to make the records properly with the help of accounting.
Determination of sale price of a business
For determination of the sale price of a business for selling the active business by the businessman can be easily determined. Selling the business to another party and the value of the active business which the businessman wants to sell can be easily found if the records are made properly. If the business investments are records properly by the businessman, then the sales price of the active business determined easily.
Evidence in the court of law
If in the future there are any arguments between the two parties. So the court wants proof and then the account records will work as proof. And in front of the court, the accounts which are recorded properly will work like proofs for the court and the court accepts the account transactions like evidence. So it is necessary for the businessman to keep its records of the accounts clear.
Assistance in taking managerial decisions
To take the decision like the managerial decision accounting is helpful for taking that type of decision. And the decisions which are the managerial decisions are like calculating the goods and services price, calculating the product mix and sale mix, decisions of the purchase, the uses of plants differently, decisions of the business continue or close, decisions of the machinery replacement, for any specific order decision regarding acceptance, and the tenders regarding decisions, etc.
Development of nation
For the development of a nation, accounting helps a lot. Accounting can develop the nation like when the businessman makes its records correctly. When the businessman makes its records properly then it means they cannot save the money which is called black money. So it means they cannot steal the tax which they have to give to the government. If the businessman cannot steal the tax then it means they have to give that tax to the Government. And the Government can utilize these taxes for the development of the nation. So with the help of the taxes which are paid by the businessman, the nation’s development is possible.
Now you have seen all important uses of accounting and now you are able to understand mostly all about the main uses of accounting.