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earned or loss incurred over a period and financial position at a particular point of

time.

2. Provide assistance to management: Accounting helps management in business
planning, decision making and in exercising control. For this, it provides financial
information in the form of reports.

3. Facilitates comparative study: By keeping systematic records and preparation
of reports at regular intervals, accounting helps in making a comparison.

4. Helps in settlement of tax liability: Systematic accounting records help in
settlement of various tax liabilities. Such as – Income Tax, GST etc.

5. Helpful in raising loan: Banks and Financial Institutions grant a loan to the firm
on the basis of appraisal of the financial statement of the firm.

6. Helpful in decision making : Accounting provides useful information to the
management for taking decisions.

Limitations of Accounting

1. Accounting is not precise: Accounting is not completely free from personal
bias or Judgment.
2. Accounting is done on historic values of assets: Accounting records assets

at their historical cost less depreciation. It does not reflect their current
market value.
3. Ignore the effect of price level changes: Accounting statements are

prepared at historical cost. So changes in the value of money are ignored.
4. Ignore the qualitative information: Accounting records only monetary
transactions. It ignores the qualitative aspects.

5. Affected by window dressing: Window dressing means manipulation in
accounting to present a more favourable position of the business than the
actual position.

Bookkeeping, Accounting and Accountancy.

Define the term Bookkeeping, Accounting and Accountancy.

Bookkeeping Book Keeping is a part of Accounting and it is the process of identifying, measuring,
recording and classifying the financial transactions.