What Are the Objectives of an Accounting System? Taking loan becomes easier if accounts are kept properly. All your company's financial information is recorded and placed into categories which can be easily accessed, summarized and evaluated. There are however both advantages and disadvantages of accounting as an information system. Is their investment well placed and will they get their money returned to them? The familiar adage that numbers don't lie is not always true. She has done public relations work for several nonprofit organizations and currently creates content for clients of her suburban Philadelphia communications and IT solutions company. Creditors want to know how a business in which they have invested money is faring in the marketplace. The systematic keeping of accounts in accepted principles helps to present reliable income tax statements based on which income tax is determined. The permanent keeping of accounts is possible since transactions are recorded systematically. total capital, total payable, total receivable, total assets, and cash in hand and a bank can be known by preparing a balance sheet at a particular date. Her writing is often focused on small business issues and best practices for organizations. Systematic and accurate accounts’ keeping minimizes the possibility of such unwanted developments. As a result, excess expenditure or misuse can be controlled and expenditures are controlled keeping consistency with the income. Planning regarding income and expenditure becomes easier through proper and accurate accounts keeping. While accounting practices are essential for running a company, they are also useful for outside entities to evaluate the financial performance and value of a company. For example, was a cost of sales expense entered in the correct category or was it possibly entered incorrectly as a default of a software program? Below are some of the main advantages of Accounting: Decision Making Helps on taxation matters Replacement of memory Comparison of results Maintenance of business records Valuation of business Preparation of financial statements As a conclusion, accounting information system brings a lot of disadvantages to the organization in today’s business environment, but accounting information system combines the study and practice of the accounting with the concept of designing, implementing, controlling and monitoring the information systems. My Absolute Worst, Life-Ruining Financial Mistakes, 5 Things To Buy Right Now Which Will Save You Money, From $10,000 In Credit Card Debt to Retired in 5 Years. Under double entry system of accounting errors and frauds in accounts, if any, can be detected easily by preparing a trial balance and appropriate measures can be taken in time for rectification. Financial summaries can reveal areas of strength and weakness. Arithmetical accuracy of accounts is also tested by preparing trial balance. Besides, sales price and income tax are determined through accounts. Keeping accounts in … For example, does extra time need to be spent tracking down delinquent customer payments to bring in more cash? Following routine accounting methods will help you stay of aware of upcoming bills so you can plan ahead and have enough cash on hand to meet your tax obligations. Accounts kept properly can be presented before the court as documentary evidence. But if you only run the numbers when it comes time to pay your bills, you could get caught short of cash and have trouble making the required deposits or payments. At the end of a particular accounting period, profit and loss of a business concern can be ascertained by preparing an income statement. A record of each sale is recorded in an invoice, payments are recorded as revenue, payroll and sales tax is set aside in a liabilities account and operating costs are expensed to the appropriate departments. Under this situation, accurate valuation of assets and liabilities is very essential. Information regarding cash in hand is very essential in running business. debtors, creditors, investors, owners, employees etc. Another one of the advantages of accounting standards is that they will save you headaches when it comes to quarterly reporting and paying of taxes. A businessman is to acquire various types of property and assets to run the business profitably and thereby he is to face a lot of liabilities. If there appears to be extremely high costs within a particular quarter, you will need to scrutinize the numbers. The main advantages of an accounting information system are the increased speed of processing the numbers, efficient organization, and classification and safety of inputted data. And timely steps are possible, if necessary, like rectifying the errors in accounts. In settlement of disputes among interested parties of business, cases are filed in the court. Do overtime hours need to be restricted to reduce payroll expenses? Did the amount of money spent on last month's advertising blast seem to pay for itself in increased revenue? Financial … As a result, a businessman can take necessary steps to control decrease of assets and an increase of liabilities. The loan giver sanctions loan on the basis of accounting information.