What is the utility of Accounting? Discussion
Answers; The preceding section has just brought out the importance of information. Effective decisions require accurate, reliable and timely information. The need for quantity and quality of information varies with the importance of the decision that has to be taken based on that information.
Individuals may use accounting information to manage their routine affairs like operating and managing their bank accounts, to evaluate the worthwhileness of a job in an organization, to invest money, to rent a house, etc. Business Managers have to set goals, evaluate progress and initiate corrective action in case of an unfavorable deviation from the planned course of action.
Accounting information is required for many such decisions—purchasing equipment, maintenance of inventory, borrowing, and lending, etc. Investors and creditors are keen to evaluate the profitability and solvency of a company before they decide to provide money to the organization. Therefore, they are interested to obtain financial information about the company in which they are contemplating an investment.
Financial statements are the principal source of information to them which are published in annual reports of a company and various financial dailies and periodicals. Government and Regulatory agencies are charged with the responsibility of guiding the socio-economic system of a country in such a way that it promotes the common good. For example, the Securities and Exchange Board of India (SEBI) makes it mandatory for a company to disclose certain financial information to the investing public.
The government’s task of managing the industrial economy becomes simplify if the accounting information such as profits, costs, taxes, etc. is presented uniformly without any manipulation or "window- dressing". Central and State governments levy various taxes. The taxation authorities, therefore, need to know the income of a company to calculate the amount of tax that the company would have to pay.
The information generated by accounting helps them in such computations and also to detect any attempts of tax evasion. Employees and trade unions use accounting information to settle various issues related to wages, bonus, profit sharing, etc. Consumers and the general public are also interested in knowing the amount of income earned by various business houses.
Accounting information helps in finding whether or not a company is overcharging or exploiting the customers, whether or not companies are showing improved business performance, whether or not the country is emerging from the economic recession, etc. All such aspects draw heavily on accounting information and are closely related to our standard of living.
Individuals may use accounting information to manage their routine affairs like operating and managing their bank accounts, to evaluate the worthwhileness of a job in an organization, to invest money, to rent a house, etc. Business Managers have to set goals, evaluate progress and initiate corrective action in case of an unfavorable deviation from the planned course of action.
Accounting information is required for many such decisions—purchasing equipment, maintenance of inventory, borrowing, and lending, etc. Investors and creditors are keen to evaluate the profitability and solvency of a company before they decide to provide money to the organization. Therefore, they are interested to obtain financial information about the company in which they are contemplating an investment.
Financial statements are the principal source of information to them which are published in annual reports of a company and various financial dailies and periodicals. Government and Regulatory agencies are charged with the responsibility of guiding the socio-economic system of a country in such a way that it promotes the common good. For example, the Securities and Exchange Board of India (SEBI) makes it mandatory for a company to disclose certain financial information to the investing public.
The government’s task of managing the industrial economy becomes simplify if the accounting information such as profits, costs, taxes, etc. is presented uniformly without any manipulation or "window- dressing". Central and State governments levy various taxes. The taxation authorities, therefore, need to know the income of a company to calculate the amount of tax that the company would have to pay.
The information generated by accounting helps them in such computations and also to detect any attempts of tax evasion. Employees and trade unions use accounting information to settle various issues related to wages, bonus, profit sharing, etc. Consumers and the general public are also interested in knowing the amount of income earned by various business houses.
Accounting information helps in finding whether or not a company is overcharging or exploiting the customers, whether or not companies are showing improved business performance, whether or not the country is emerging from the economic recession, etc. All such aspects draw heavily on accounting information and are closely related to our standard of living.
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