Accounting or accountancy is an approach to accounting that seeks to model the methods of decision making, data processing, measurement and reporting of financial or non-financial information about organizations including corporations and businesses. Accounting methods are based on principles, concepts, and techniques that are mathematically precise. One of the foremost and widely accepted concepts in accounting is the double-entry bookkeeping system.
Double-entry bookkeeping involves recording financial transactions in two ways: debit and credit. A company can use either accountants or bookkeepers to perform the tasks of recording debits and credits. Accountants keep track of the debits while bookkeepers create accounts for the credits. The differences between the two systems are relatively simple to see when comparing financial position at a given point of time with subsequent periods.
When it comes to applying the principles of double-entry bookkeeping to accounting reports, you’ll need to apply them both on an International level. It would be impractical to do so on a national level. You might be able to do it on a regional or even local level, but not on a global scale. That’s why many international companies have opted to outsource accounting responsibilities to independent Certified Public Accountants (CPA). Certified Public Accountants (CPA) have the accounting expertise to meet the complexity and demands associated with accounting responsibilities for small businesses on a global basis. In this way, CPA helps small businesses maintain proper and effective cash flows, optimize their balance sheet, control risk, and address other complex matters that face their business without the assistance of accounting experts.
To understand how these professionals make accounting more manageable, it’s important to understand first what exactly accounting is. Accounting is the process of collecting financial data that allows managers to make informed decisions about investing, operating, and financing. Accounting involves the collection of financial data that can provide a manager with information regarding trends, circumstances, and trends in the marketplace. The goal of accounting is to provide managers with sound advice about how to improve the performance of a company, plan for growth, identify opportunities, reduce costs, or enhance cash flows. For example, if a company wishes to increase its cash flows by increasing capital expenditures, it would first need to know which capital expenses were most profitable; then it could implement plans to increase the profitability of those activities.
Generally, an accounting system will include the following elements: financial statements, notes, accrued expenses, income statement, and the balance sheet. In order for a manager to understand his or her financial statements, he or she would need to access the company’s income statement, bank statements, equity income statement, and cash flow statement. Typically, a manager will create the initial financial statements, and then create the required cash flows estimates through the use of internal management information systems. A CPA would then complete the audit of the financial statements to provide the needed confidence.
Beyond the scope of this article, accurate financial statements are the key to the success of any business. This is why it is very important that a small business owner understand his or her accounting system. Only then can he or she effectively utilize his or her resources to grow his or her business into the next level. Additionally, the use of an accurate accounting system provides a positive reflection on the company and allows the manager to accurately make the necessary strategic and tactical decisions regarding the use of resources.
