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.

(i) Bills Receivable : A bill of exchange, when accepted by a debtor is called a bills receivable. A bill of exchange is an order instrument, written by a creditor and accepted by a debtor to pay a certain amount on demand or after a certain period.
(ii) Bills Payable: When credit purchases are made, the settlement/payment to the creditors are sometimes done through a document, known as "Bills Payable." These bills are accepted by the business and will be honoured by paying to the suppliers, on the date mentioned on the bill.
(iii) Income : Income is different from 'revenue'. The difference between revenue and expense (if revenue is more than expense) is called income. For example, the goods costing Rs 10,000 are sold for Rs 12,000; the cost of goods, i.e., Rs 10,000 is expense. The sale of goods, i.e., Rs 12,000 is the revenue and the difference between revenue and expense, i.e., Rs 2,000 is the income.

In case of companies, ownership and management are separate. Management needs accounting information to take various decisions in performance of their duties. Accounting information is also required to make future plans and controlling the performance of subordinates.

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 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.

External users are those who have limited authority, ability and resources to obtain the necessary information and have to rely on financial statements. (Balance sheet, profit and loss account) Primarily, the external users are interested in the following:
(i) Investors and potential investor: Information on the risks and returns on investments.
(ii) Unions and employees groups : Information on the stability, profitability and distribution of wealth within the business.
(iii) Lenders and financial institutions: Information on the creditworthy of the company and its ability to repay loans and pay interest.
(iv) Suppliers and creditors: Information on whether amounts owed will be repaid when due, and on the continued existence of the business.
(v) Customers : Information on the continued existence of the business and thus the probability of a continued supply of products, parts and after sales service.

(i) Rs 5,00,000
(ii) Rs 1,00,000
(iii) Rs 2,00,000
(iv) Mr. Peace, Rs 1,50,000
(v) Rs 5,000
(vi) 50,000
(vii) Rs 30,000
(viii) Mr. Ravi Rs 1,00,000
(ix) Rs 35,000
(x) Assets : debtors; Liabilities : creditors; Revenues: sales: Expenses: discount, salary: None of the these: Drawing.