![]() In Compliance of Law :Įvery business has to deal with various government departments like income tax, sales tax, custom and excise etc. Thus, the accounts can be used as an evidence in the court of law. The business transactions are recorded in the books of accounts supported by authenticated documents viz. The profitability and soundness can be measured by the Trading and Profit & Loss Account and Balance Sheet, the final results of books of accounts. These financial institutions lend money on the basis of profitability and soundness of the business enterprise. In those cases further funds can be raised by taking loan from some financial institutions like banks, IDBI, ICICI etc. Sometimes, due to paucity of funds business cannot do well. Helps in Raising Loan :įor further expansion, business must have sufficient funds. ![]() Balance Sheet shows the value of assets & liabilities of the business which can be used to calculate its net worth. Through accounting, the correct picture can be depicted in Balance Sheet and as such the purchase price can be determined. ![]() In case of sale of business or conversion of one business into another, true and fair value of the business is calculated.
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