The accountant performs various financial functions within a business including collecting, recording, analyzing, and reporting financial data. Financial accounting tracks financial transactions for external reporting, while management accounting prepares internal reports for decision making. The accountant oversees accounting systems and bookkeeping processes to provide reliable information. Transactions are recorded in books of prime entry like journals and ledgers, then transferred to financial statements including the income statement and statement of financial position.
The accountant performs various financial functions within a business including collecting, recording, analyzing, and reporting financial data. Financial accounting tracks financial transactions for external reporting, while management accounting prepares internal reports for decision making. The accountant oversees accounting systems and bookkeeping processes to provide reliable information. Transactions are recorded in books of prime entry like journals and ledgers, then transferred to financial statements including the income statement and statement of financial position.
The accountant performs various financial functions within a business including collecting, recording, analyzing, and reporting financial data. Financial accounting tracks financial transactions for external reporting, while management accounting prepares internal reports for decision making. The accountant oversees accounting systems and bookkeeping processes to provide reliable information. Transactions are recorded in books of prime entry like journals and ledgers, then transferred to financial statements including the income statement and statement of financial position.
The accountant performs various financial functions within a business including collecting, recording, analyzing, and reporting financial data. Financial accounting tracks financial transactions for external reporting, while management accounting prepares internal reports for decision making. The accountant oversees accounting systems and bookkeeping processes to provide reliable information. Transactions are recorded in books of prime entry like journals and ledgers, then transferred to financial statements including the income statement and statement of financial position.
An introduction to the role of the accountant in business
o The responsibilities of the accountant within a business: – An accountant performs financial functions related to the collection, accuracy, recording, analysis and presentation of a business, organization or company's financial operations. The accountant usually has a variety of administrative roles within a company's operations. In a smaller business, an accountant's role may consist of primarily financial data collection, entry and report generation. Middle to larger sized companies may utilize an accountant as an adviser and financial interpreter, who may present the company's financial data to people within and outside of the business. Generally, the accountant can also deal with third parties, such as vendors, customers and financial institutions. o The difference between financial accounting and management accounting and the purpose of each: – Financial accounting is a specialized branch of accounting that keeps track of a company's financial transactions. The purpose of accounting is to provide the information that is needed for sound economic decision making. The main purpose of financial accounting is to prepare financial reports that provide information about a firm's performance to external parties such as investors, creditors, and tax authorities. – Management accounting is the process of preparing management reports and accounts that provide accurate and timely financial and statistical information required by managers to make day-to-day and short-term decisions. Unlike financial accounting, which produces annual reports mainly for external stakeholders, management accounting generates monthly or weekly reports for an organization's internal audiences such as department managers and the chief executive officer. These reports typically show the amount of available cash, sales revenue generated, amount of orders in hand, state of accounts payable and accounts receivable, outstanding debts, raw material and inventory, and may also include trend charts, variance analysis, and other statistics. o The role of the accountant in developing and overseeing accounting information systems to provide reliable and relevant information for both financial and management purposes: – The role of the accountant includes overseeing the work of bookkeepers and ledger clerks. Bookkeeping is the recording of financial transactions, and is part of the process of accounting in business. Transactions include purchases, sales, receipts, and payments by an individual person or an organization/corporation. Purchase ledger clerks main duties include matching and coding invoices, preparing and running BACS payments, reconciling supplier statements and working out VAT payments. The Purchase Ledger Clerk will generally work as part of the finance team, however they may work independently in a smaller organisation. 3.2 Types of business organisation (part 1) o Types of business organisations including different business ownership models: – Business organisations are: sole traders, partnerships, private (Ltd) and public limited liability companies (plc). – A sole trader is a person who is the exclusive owner of a business, entitled to keep all profits after tax has been paid but liable for all losses. Partnership is an association of two or more people as partners. – A limited company has special status in the eyes of the law. These types of company are incorporated, which means they have their own legal identity and can sue or own assets in their own right. The ownership of a limited company is divided up into equal parts called shares. Whoever owns one or more of these is called a shareholder. – Private limited companies are often a small business such as an independent retailer in a market town. Shares do not trade on the stock exchange. A public limited company (plc) is usually a large, well-known business. This could be a manufacturer or a chain of retailers with branches in most city centres. Shares trade on the stock exchange (a centralised market where business shares are traded). o The associated benefits and risks and the impact on business reporting: o Sources of finance for different forms of business organisation and the risks related to those: - The sources of finance are: owner’s capital, partners’ capital, bank overdraft, bank loan, mortgage, ordinary shares, debentures. Owner’s capital, also called owner's equity, is the equity account that shows the owners' stake in the business. In other words, this account shows the how much of the company assets are owned by the owners instead of creditors. Partners’ capital is the equity account of two people or more who co-own the business and contribute their assets and liabilities to the business. Bank overdraft refers to a checking account where the amount of checks presented to the bank for payment exceeds the amount on deposit. When this occurs we say that the checking account customer has overdrawn its account. The overdraft means that the bank's records indicate a negative checking account balance. 3.2 Types of business organisation (part 2) A bank loan is the most common form of loan capital for a business. A bank loan provides medium or long- term finance. The bank sets the fixed period over which the loan is provided (e.g. 3, 5 or 10 years), the rate of interest and the timing and amount of repayments. A mortgage is a legal agreement by which a bank, building society, etc. lends money at interest in exchange for taking title of the debtor's property, with the condition that the conveyance of title becomes void upon the payment of the debt. Ordinary shares represents equity ownership in a company proportionally with all other ordinary shareholders, according to their percentage of ownership in the company. All other shares of a company's stock are, by definition, preferred shares. A debenture is one of the most typical forms of long term loans that a company can take. It is normally a loan that should be repaid on a specific date, but some debentures are irredeemable securities (sometimes referred to as perpetual debentures). The majority of debentures come with a fixed interest rate. 3.3 The Double Entry Model (Part 1) o The double entry system including the recording of transactions from source documents in books of prime entry and ledger accounts; transferring accounts to income statements, balancing accounts and the preparation of statements of financial position: - Sources documents are: Purchase invoices are a commercial document or bill presented to a buyer by a seller or service provider for payment within a stated time frame that indicates what has been purchased, in what amount and for what price. A purchase invoice can be used to prove that something was bought and how much was paid for it. A sales invoice can be simply defined as the request of payment by the customer for goods sold or services provided the seller. An invoice generally lists the description and the quantity of the item sold or service provided. The document is also a record of the sale for both the seller and the buyer. A credit note which is also known as a credit memo, a commercial document that the supplier produces for the customer to notify the customer that a credit is being applied to the customer for various reasons. The reasons normally include the following: • the customer returned the goods or rejected the services for any number of reasons • the goods were damaged in some way, usually during transit • there was a mistake in the price on the original invoice • the customer overpaid the original invoice Cheque counterfoils are a part of a bank check, money order, etc., that is kept by the issuer and on which a record of the transaction is made. Till rolls are paper rolls for use in cash registers and Electronic Point of Sale printers, to show that a payment has been made in exchange for a good or service. Cash receipts are a written document that is produced by a company each time it receives money for goods or services. Paying-in slips have stubs (also called counterfoils), which the accountholder completes with details of the deposit. The cashier stamps and initials these stubs when accepting the deposit. 3.3 The Double Entry Model (Part 2) A bank statements (for standing orders, direct debits, credit transfers, dishonored cheques, debit card transactions, direct transfers) is a printed record of the balance in a bank account and the amounts that have been paid into it and withdrawn from it, issued periodically to the holder of the account. - Books of prime entry are: A purchases journal is a record of all acquisitions made on credit during a period. In other words, this is a journal that keeps track of the orders placed using vendor credit or accounts payable as well as the current balance owed to each vendor. The sales journal is used to record all of the company sales on credit. Most often these sales are made up of inventory sales or other merchandise sales. Notice that only credit sales of inventory and merchandise items are recorded in the sales journal. Cash sales of inventory are recorded in the cash receipts journal. Sales returns journal is a book in which seller records all the sales that have been returned to him by his customers. Sales returns journal is also known as returns inwards book and sales returns day book. A seller must expect in the course of business that some of his customers will return goods for some solid reasons (wrong color, wrong size, not according to specification, imperfectly finished etc.) purchases returns journal general journal three column cash book