• It is very difficult to remember all day to day transactions. With the help of recording the transactions, this problem is solved.
  • Profit & Loss account and the Balance Sheet are prepared to show the actual position of the business firm. These statements can be prepared only if the accounts are maintained in proper manner.
  • With the help of accounting, a comparison can be done between the profits of one year with earlier years. This helps the management to understand the performance of the firm.
  • So many decisions are to be taken by management with the help of accounts records like reducing the cost of product or to increase the profitability and to repay the loan etc.
  • Some time the account records are proved to very good evidence in the courts and before other authorities.
  • On the basis of accounting information, the management can do planning for the next year. For example:- to find out the best areas for investment of the funds of the firm to get maximum returns, to discontinue the product which is not generating any profit to the firm.
  • Accounting gives the useful information to other interested parties like creditors, money lenders, banks, consumers, various tax authorities and employees etc.
  • It will be very easy to get our various tax assessments done if correct account records are kept.
  • Some time the businessman is not able to pay the loan and other liabilities due to heavy losses or other reasons. In that case, he is declared as insolvent and competent authority can relieve him from such heavy liabilities and legally direct him to settle the dues as per the money available with him.  But he can not prove his insolvency unless he keeps his account records properly.