What are accounting estimates used for?

Accounting estimates are primarily used for approximating unknown values for reporting purposes. In accounting, certain figures cannot be determined with complete precision due to the inherent uncertainties involved in business transactions and financial reporting. For instance, companies often have to estimate bad debt expense, warranty liabilities, or depreciation expense on fixed assets. These estimates ensure that the financial statements reflect a fair and accurate view of the company's financial position and performance, which is crucial for stakeholders who rely on this information for decision-making.

The other options, while relevant to various aspects of finance and accounting, do not directly relate to the primary function of accounting estimates. Calculating tax liabilities typically involves applying specific tax laws and rates rather than estimations. Assessing market trends and determining investment returns are financial analyses that utilize various data and models but do not specifically pertain to the role of accounting estimates in financial reporting.