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Assistance of management:

Managerial functions of planning, control and co-ordination are assisted by facts, figures and their interpretation provided by what has come to be known as management accounting. In the planning process, the management would like to know the details in respect of sales, production, expenses etc., in respect of future period(s) and also the flow of cash. The accountant participates in the preparation of various types of budgets by providing past data so as to work out the future changes. The best co-ordination is achieved by minimizing the expenses and deriving the maximum benefits for the enterprises. Accounting records are drawn in terms of costs and accomplishment and the accountant brings about complete coordination by spelling in details the responsibility of each function and its relationship with other positions. Management control means that work is done according to plans and the costs incurred are within specified limits. The internal audition branch of accounting is an effective tool to detect which department is conforming to plans. Accounting helps not only in planning business decisions activities, the information it provides is also useful in making business decisions on such matters as: what should be the sale price of the product? Whether the goods should be produced in the factory or purchased from outside sources? What should be paid in dividends? What type of financial incentives be offered to employees? and so on.

Records rather than memory:

 It is not possible at all to do any business by just remembering the business transactions which have grown in size and complexity. Transactions, therefore, must be recorded promptly in the books of accounts so that necessary information about them in available in time and free from bias.

Inter-period comparisons:

Accounting information when recorded properly can be used to compare the results of one year with those of previous year(s).

Aid in legal matters:

 Systematically recorded accounting information can be produced as firm evidence in a court of law.

Help in taxation matters:

Income tax and sales tax authorities could be convinced about the taxable income or actual turnover (sales), as the case may be, with the help of written records.

Sales of a business:

In case, a sole trader or a partnership firm or even a company wants to sell its business, the accounting information can be utilized to determine proper purchase price.

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