✓
Answer
By keeping books of accounts, financial position of the business can be known. Therefore we can say that accounting is the image of business transactions. Various advantages or utilities of accounting are as under:
$1.$ Accounting information : At the end of the specified period, receipts and payments as well as incomes and expenses of the business can be known. At the end of the year whether we have earned a profit or loss in the business can be known from final accounts prepared at the end of the year.
$2.$ Financial position : At the end of specified period, information regarding business assets, liabilities, receivables, capital, etc. can be obtained.
$3.$ Use of capital and reserves : From the financial position of the business we get the idea about how the capital, reserves, debts and annual profits are used in different goods — properties of the business.
$4.$ Gross profit : At the end of specific period, from the information of purchases and sales, gross profit of the business can be known.
$5.$ Net profit : At the end of specific period, from the information of gross profit and incomes- expenditures, we get the idea of net profit.
$6.$ Comparative study of profit: Compare to the past years what is the change in the profit of current year, what are the reasons for that and what are the solutions for that, etc. can be decided.
$7.$ Comparison : Book-keeping is useful for the comparison of accounts with the other business concerns and to take certain business decisions. For e. g., Advertisement expense.
$8.$ Returns on capital investments: Returns on capital investments can be decided on the basis of profit. Comparative study of rate of capital investment is possible.
$9.$ Control: Directly or indirectly informations are available which can throw some light on different maipractices done by employees and necessary steps can be taken to remove such unfair practices.
$10.$ Taxes: It becomes easy to estimate the due government taxes like income tax, sales tax, $VAT,$ octroi, etc.
$11.$ Useful to others : With the help of books of accounts. insurance company, competitors, banks, employees, share-holders, creditors and government can obtain information regarding their interest and accordingly they can plan their strategy and can present their demands.
$12.$ Policy decisions : With the help of bookkeeping the development of business in the current year, compare to that of the previous year, can be known and depends on that which types of changes can be taken in the future that can also be decided. Therefore, we can say that, accounting is a log chart of the past, a barometer of the present and a forecast of the future.
Need a full question paper?
Generate a complete, print-ready paper with questions like this in minutes — across 16+ boards, with answer keys.