The role of accounting has been changing over the period of time. In the modern world, the role of accounting is not only limited to recording financial transactions but also to provide a basic framework for various decision-making, providing relevant information to various users and assist in both short-run and long-run planning. The role of accounting in the modem world is given below:
(i) Assisting management : Management uses accounting information for short-term and long term planning of business activities to predict the future conditions, prepare budgets and various control measures.
(ii) Comparative study : In the modern world, accounting information helps us to know the performance of the business by comparing current year's profit with that of the previous years and also with other firms in the same industry.
(iii) Substitute of memory: In the modern world, every business incurs large number of transactions and it is beyond human capability to memorise each and every transaction. Hence, it is very necessary to record transactions in the books of accounts.
(iv) Information to end user : Accounting plays an important role in recording, summarising and providing relevant and reliable information to its users, in form of financial data that helps in decision-making.

Following are the advantages of accounting:
(i) Helps in ascertaining the profit and financial position: Accounting facilitates the preparation of financial statements e.g., Profit and Loss Account and Balance Sheet, which depicts the profit and financial position of the business.
(ii) Assists in managing the business : Accounting helps the management in decision-making to run the business efficiently and effectively.
(iii) Recording of transactions: A businessman cannot remember all the transactions, how-so ever sharp his memory may be. Therefore, every transaction should be recorded in black and white so that transactions are not missed out and there may not be any misappropriation.
(iv) Evidence in the court of law : If the accounts of business are kept properly, according to the principles of accounting, they can be presented in the court of law as necessary documentary evidence.
(v) Correct payment of taxes : Accounting helps in ascertaining the tax liability of the business correctly. Taxation authorities insist that accounts are to be maintained according to the principles of accounting.
(vi) Comparative study: Financial statements facilitate inter-period and inter-firm comparisons to detect the strong and weak points of the business.

Following are the advantages of accounting:
(i) Helps in ascertaining the profit and financial position: Accounting facilitates the preparation of financial statements e.g., Profit and Loss Account and Balance Sheet, which depicts the profit and financial position of the business.
(ii) Assists in managing the business : Accounting helps the management in decision-making to run the business efficiently and effectively.
(iii) Recording of transactions: A businessman cannot remember all the transactions, how-so ever sharp his memory may be. Therefore, every transaction should be recorded in black and white so that transactions are not missed out and there may not be any misappropriation.
(iv) Evidence in the court of law : If the accounts of business are kept properly, according to the principles of accounting, they can be presented in the court of law as necessary documentary evidence.
(v) Correct payment of taxes : Accounting helps in ascertaining the tax liability of the business correctly. Taxation authorities insist that accounts are to be maintained according to the principles of accounting.
(vi) Comparative study: Financial statements facilitate inter-period and inter-firm comparisons to detect the strong and weak points of the business.

Following are the important objectives or functions of accounting:
(i) Maintaining Records
(ii) Estimating Profit or Loss
(iii) Presenting the Financial Position.

One of the important attributes of accounting is that only those transactions and events are recorded in accounting, which are of financial character. It means that events or transactions, which can be expressed in terms of money, are recorded in the books of accounts. Consequently, those events or transactions which cannot be expressed in terms of money, do not find place in the books of accounts though they may be very useful for the business. For example, general health condition of the chairman of the company, working conditions, sales policy, quality of products, labour-management relations, etc. cannot be expressed in monetary terms and, hence, are not recorded in the books. It makes accounting information more meaningful as accounting entries are supported by facts. Accounting informations are free from personal bias and whims of the accountant.

Following are the characteristics of the accounting:
(i) Economic events: Accounting requires events to be expressed in terms of money. Transactions should involve transfer or exchange of monetary value between the business entity and outsiders.
(ii) Identification, measurement, recording and communication : Accounting is a process of identifying the transactions to be recorded, quantifying the transactions into financial terms, recording the transactions in a systematic manner and communicating the desired information to various interested groups.
(iii) Users of information : Accounting is complete when information is communicated to various groups interested in the functioning of business entity.

Following are the limitations of financial accounting:
(i) Incomplete information: The accountant measures only those events that are financial in nature, i.e., that are capable of being expressed in money. Nonmonetary items or events, however, significant they may be, are not measured or recorded in accounting. For example, competency of management, competition in the market, industrial relations, etc.
(ii) Inexactness: Accounting data is some-times based on estimations and it may be inaccurate. Therefore, profits and financial position disclosed by such accounts may not be true and exact. For example, stocks are also valued on some assumptions. Actual useful life of an asset cannot be accurately calculated for the purpose of depreciation.
(iii) Personal influence of accountant: Accounting may be influenced by the personal judgement of the accountant. He applies a choice between different methods of inventory valuation, depreciation methods, provision for doubtful debts, treatment of capital and revenue items and so on. Thus, due to lack of objectivity, income measured may not be true in certain cases.
(iv) Assets may not be shown at their real value: Fixed assets are shown at written down value, i.e., cost less depreciation. There may be a great difference between book value at which assets are shown and current replacement cost. Certain valueless assets are also sometimes shown in Balance sheet, such as, goodwill, patents and trademark, preliminary expenses, etc.
(v) Effect of price level changes not considered : Accounting statements are prepared at historical cost. Money as a measurement unit, change, it is not thus, considered while preparing Profit & Loss Account, thus, the accounting information will not show true financial results.
(vi) Non-monetary transactions are ignored: Financial statements record only monetary transactions. Certain important and valuable assets like Human Resources, do not find a place in a Balance sheet. This is because, there is no yard- stick to measure the value of Human Resources in monetary terms.

Development of Accounting : In ancient times, around 4000 B.C., accounting was used for recording wages and salaries, deposits and withdrawals of valuable goods (such as gold and silver) from the treasures of the king. Afterwards, it was used to record the receipts and payments and balancing of government financial transactions. During 1500 A.D., accounting was used by business firms for recording transactions related to business. In 1800 A.D., accounting was used to record transactions and also to provide information to various users of financial data.
Role of Accounting : While in the earlier times accounting was merely concerned with recording the financial events (i.e. record keeping activity). Now-a-days, accounting is done with the rationale of not only maintaining records, but also providing an information system that provides important and relevant information to various accounting users.
(i) Substitute of memory : As it is beyond human capabilities to remember each and every business transaction, accounting plays an important role in recording these transactions in the books of accounts.
(ii) Assistance to management : Management uses accounting information for short-term and longterm planning of business activities and to control various costs and budgets.
(iii) Comparative study : In order to ascertain the performance of the business, accounting enables comparison of current year's profit with that of previous years (intra-firm comparison)and also with other firms in the same business (inter-firm comparison).
(iv) Evidence in court: It acts as evidence that can be used or presented in the court, if any discrepancy arises in the future.

Accounting is a systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating financial information. It reveals profit or loss for a period, and the value of assets, liabilities and owner's equity.
The objectives of accounting are follows:
(i) To keep systematic records.
(ii) To protect business properties.
(iii) To ascertain the operational profit or loss.
(iv) To ascertain the financial position of business.