ADVANTAGES AND DISADVANTAGES OF ACCOUNTING

Related topics:


ADVANTAGES OF ACCOUNTING: There are some main advantages of the accounting is:

HELPFUL IN RAISING LOANS: A business cannot start without the proper money or funds. Accounting is very helpful to raise or provide the loan to a business from various banks, IDBI etc. Loans are passed by any institutions for a business with the help of accounting.

SYSTEMATIC RECORDS AND COMPLETE TRANSACTIONS: Accounting provides the all records in a systematic way and completes all transactions of books of account with the help of its systematic way.

PROVIDE AUDIT CERTIFICATES: Depending on the size, nature, and type of business certification of books of accounts is called audit. This certificate is mandatory for any business.accounting provides that certificate to business which is showing that there is no irregular work is done in business.

MAKE A GOOD MANAGEMENT: It helps the management in planning as well as control of different activities of the business enterprise. It also checks the all performed activities of the management.

DEALS WITH VARIOUS LAWS: Every business have to deal with various government departments lie income tax, sales tax, etc. Accounting helps in preparations and filing of returns.

WORK AS AN EVIDENCE: The business transaction is recorded in books of accounts as authenticated documents viz, custom and excise etc.Thus the accounts can be used as an evidence in the court of law.

HELPFUL IN DECISION MAKING:The main function of management is decision making.Accounting helps and guides the management to take decisions in respect of determining selling price, deduction of cost, increase in cost etc.

CALCULATE TRUE VALUE OF BUSINESS: Through accounting, the correct picture can be depicted in the balance sheet and as such the purchase price can be determined. The balance sheet shows the value of assets and liabilities of the business which is helpful to calculate the net worth.

DISADVANTAGES OF ACCOUNTING: The following are the main limitations of the accounting:

IGNORE NON- MONETARY INFORMATION: Accounting ingnore the many kinds of non-monetary information regarding a business. The account only solves the funds and money-related problems in an organization.

ACCOUNTING DO NOT PROVIDE DETAILED INFORMATION: Its information does not include the qualitative aspects of the business. Many non-monetary terms like good labor relations, quality of goods, etc are not considered in it.

NO EFFECT OF INFLATIONARY TRENDS: As the money is not a stable unit of measurement, inflation makes most of the figure out of date.

PERSONAL JUDGEMENT: Accounting is not completely free from personal bias or judgment. Through transactions are recorded on an actual basis, but there are many instances where estimates have to be made for calculating profits.

DO NOT CARRY ACCURATE INFORMATION: Accounting information is based upon various fundamental assumptions, concepts, and conventions based on experience rather than any specific inquiry.

Leave a Reply

Your email address will not be published. Required fields are marked *