Question

Discuss TWO important uses of Financial Accounting to a business enterprise.

Answer 1

Helps in raising funds:

Financial accounting helps in evaluating performance of a company. Financial statements shows the profit made in a accounting period. It shows how efficiently a company is using it's resources in generating earnings. A thorough analysis of financial statements helps investors in making decesion whether to invest in a company. A business enterprise can raise funds from investors by showing it's performance through financial statements. A business enterprise can also raise funds at a cheaper rate if the financial accounts depicts a good picture of the performance of the company.

Helps in creating future projections:

Financial accounts helps in forecasting future returns and expenses of a business enterprise. It helps in creating budget as per the forecasts. This helps in having an idea how much funds needs to be raised in future to meet expectations.