How does an accountant help in planning and controlling a large commercial organization?

Answer 1

The functions of accounting can be enumerated as follows : (i) Maintenance of business records. All financial transactions are recorded in a systematic manner in books of accounts so that there is no need to rely on memory. It is not possible for any human being to remember all what happened in daily operations of a business. (ii) Preparation of financial statements. Systematic records enable the accountant to prepare the financial statements-trading and profit and loss account to calculate profit or loss during a particular accounting period and balance sheet to state the financial position of the business on a particular date. Profit is a measure of the successful running of thel business. (iii) Comparison of results. Systematic maintenance of business records enables the accountant to compare profit of one year with those of earlier years to know the significant facts about the changes. This helps the business to plan its future affairs accordingly. (iv) Decision-making. For day-to-day solving of a number of problems like what should be the selling price of goods produced? Whether a part should be made in the factory or purchased from outside? etc., the accountant helps the management by providing the relevant information. (v) Good evidence in courts. Records of business transactions are treated as satisfactory evidence in courts of law. (vi) Planning and control operations. Planning operations like sales, production, cash requirements for next accounting periods are achieved with the help of accounting information and estimates based on that information. Management is also interested in observing that the operations in the business are going on according to plan and all the departments are spending within their prescribed limits. (vii) Provides information to interested groups. Various interested parties ar groups like owners, creditors, management, employees, government, consumers, creditors are interested in accounting information related to various aspects, viz., sales, production, profits, etc. Accounting provides suitable information to such interested parties. (viii) Taxation problems. In settlement of taxation matters, systematic maintenance of records is a big help. (ix) Valuation of business. Accounting records kept in a proper way enable a business unit to determine the purchase or sale price in a simple manner. (x) An insolvent person is able to explain the past transactions without difficulty if proper accounting records are maintained.