Accounting is a common term used in enterprise entities and institutions. It refers to the process of processing, organizing, and or summarizing financial information and records. Alongside fulfilling the customer’s needs, each business exists to make economic progress. Without accounts, it may not be easy to know whether the company is making any financial advancement. The need for accountancy is therefore as special as the business itself.
Types Of Accounting
There are varied types of accounting. The so-far realized ones include the following.
Each year, your business will be generating its financial statements. This information reaches many parties like who are interested in knowing the financial health of your enterprise. These people could be investors, government agencies, auditors, lenders, potential buyers, and many others.
Financial accounting is, therefore, the process of preparing the annual financial statement in this manner.
This type is very similar to the financial one; however, with two exceptions:
Here, the produced accounting statements are for internal use only. Hence, they are generated more frequently, maybe quarterly or even monthly.
When your business is starting, you can always individually handle this, especially if it is a small one. However, when it grows, and you have much to handle as the manager, you can assign these duties to a professional. They will be handing you the reports for your interpretation.
It refers to the accounts statement you receive, giving you recommendations on how best to manage your tax return.
The Internal Revenue Service (IRS) is the central player in tax accounting. It lawfully necessitates that your tax information sticks to the Internal Revenue Code (IRC). This procedure, therefore, ensures you don’t overpay your tax incomes. If you do, getting your tax refund is no difficult task. IRS has easy to follow the procedure on this.
As a manager, if you take time to analyze the financial report of your business thinking on ways of increasing the revenues, that will be cost accounting. It feeds the managerial accounting as from it; you make the decisions. You will be considering the inputs and outputs trying to find out the best ideas to improve on your profit margins.
Through this method, you get to analyze all your company’s liabilities and unpaid bills. This analysis will tell you whether you should continue borrowing or not. Also, you will know the ways to repay the unsettle bills without them weighing down on you.
Is Accounting Same As Bookkeeping?
Often people confuse these two owning their coincidental similarities. Others, however, think that bookkeeping is a single trait of accounting. If you want to differentiate these two, then you could say the following. Bookkeeping is the method upon which you record and classify your financial transactions. Accounting, on the other hand, is using that financial data to analyze, strategize, and plan for your business.
Why Accountancy Your Business Needs Accountancy
Accountancy is a highly sensitive part of any business. It is from the financial reports it gives that you can know the full information on your profits, taxes, and newly profitable ideas you need to implement. Good financial records also expose your business to potential investors and buyers who, together, are of great value to your business.
When hiring anyone for this purpose, they should be professionals who understand the principles of accounting. They will always help you get better easy to interpret data and financial information.