Because the United States Congress did not originally possess the power to directly tax its citizens in order to raise revenue, a means of raising money through the sale of land was devised. The Land Ordinance of 1785 was, therefore, passed to enable the government to sell land west of the Appalachian Mountains, north of the Ohio River, and east of the Mississippi River. This Ordinance, unlike the one of 1784, also laid out how the land would be first sold, then settled and governed. With this plan, the Land Ordinance of 1785 paved the way for the Northwest Ordinance of 1787, which addressed the political needs of this territory.
Another advancement made by the 1785 Land Ordinance was the establishment of the foundation for the Public Land Survey System which provided a mechanism for the division of land into rectangular sections, a methodology used in future U.S. lands. Another way in which the Land Ordinance was also important was because it provided a means for free public education to be financed by the sale of the sixteenth section of townships.