What is Accounting?
The Macquarie Dictionary (2nd Edition) states Accounting is the theory and system of setting up, maintaining, and auditing the books of a firm, the art of analysing the financial position and operating results of a business firm from a study of its sales, purchases, overheads etc. (distinguished from bookkeeping in that a Bookkeeper only makes the proper entries in books setup to the accountants plan.)
This is very relevant as it emphasises the difference between accounting and bookkeeping which is quite often misunderstood.
Accounting evolved from approximately 5000BC of very primitive record keeping to todays very sophisticated accounting techniques required by business directors, managers, employees, shareholders and general public. As businesses progressed over the ages and risks were assessed, accounting had to improve to enable businesses to manage the risk and produce results for interested parties.
Financial accounts fall into two main categories internal accounts and external accounts. Internal accounts are a necessity by most businesses or associations so that financial progress can be examined and acted upon. Internal accounts may take the form of budgets, departmental accounts, cost accounts, or in particular accounts that management can use as quickly as possible to make correct decisions. Accountants nominate accounts required and then interpret the results and make suggestions for management to make the decisions. Jobs accounting or cost accounting is a valuable tool for management to pin point jobs that are not profitable. Cash flow analysis accounts are a very useful tool and a necessity in the current world financial crisis.
External accounts are for shareholders and other interested parties including those offering financial services. External accounts are necessary for companies listed on the stock exchange and for those companies required by statute to prepare financial statements. These accounts follow a standard format which is now dictated by world standards of presentations. Our Accountants are multi functional as well as specialising in particular areas of expertise so that we can as a group tackle most areas of accounting.
Many of our clients might require a Tax Accountant. In these cases we have a specialist Tax Accountant who will be available to that client on an ongoing basis so that continuous decisions are made by the client that are favourable to effect legal tax minimisation.
Accounting “vs” Bookkeeping
As indicated under ‘What is Accounting’ there is a vast difference between accounting and bookkeeping. In fact bookkeeping is a section of accounting. Our practice dedicates a complete section to bookkeeping which has competent experienced Bookkeepers and data processors operating around the clock to produce low cost financial accounts to be utilised by internal or external accountants and their businesses and interested parties such as Banks, Tax Authorities and shareholders or committees. Our quality control is documented and personnel are fully and regularly trained. Therefore quality, low price and service is our goal.
Accounting is another complete section and is fully manned by qualified experienced Accountants whose qualifications from either Charted Accountants, or The Australian Society of Certified Public Accountants (CPA’s).
Frequently Asked Questions
What are the most common form of accounts required?
Profit and loss account and Balance Sheet. The profit loss account shows income less expenses for a period. The Balance Sheet is really the carrying forward of assets and liabilities from one period to the next.
Can financial accounts used to prepare tax returns be used for management information?
Yes with care. Accountants generally prepare accounts that give maximum information of results to the business entity and then make adjustments to items to arrive at taxable income or loss.
What type of financial accounts are beneficial to management?
Accountants will require budgets to be prepared forecasting the required future period. The accountant will then have the actual results prepared and compared to the budget. Variations of actual results to budget are then investigated. This is a simple budget comparison.