Accountability Through Accounting

As an individual or business there is need for a level of accountability to ensure your life or business is governed above board. Accounting is part of the business systems every business must have to help manage the resources and processes. You can only tell the health of the company if you have the correct Accounting system in place. One of the reason behind the failure of some businesses is the fact that there is minimal or no accountability of the leaders to the board or the board to the employees and so on. If no one can be held responsible for the business' performance then that business suffers from stunted growth.

- Accounting enhances accountability - Accounting produces the much needed financial performance reporting which the Directors can use to bring employees to account. We can easily tell the level of performance of a leader by simply analyzing the profit they managed to make in a month through the strict accounting policies.

- Accounting tells the health of a business - Before any investor gets involved in a business, they check the health status of the business they are about to invest in. This happens when the accounting system produces the reports. sometimes the financials are published in the press and signed off by the company secretary who then assumes full or total responsibility or accountability for the correctness of the information.

- Accuracy in Accounting is critical - One would rather not have accounting information that accumulate papers which are not accurate. With wrong data, wrong decisions are made. No one can be brought to account. It is costly to make decisions based on incomplete or wrong information.

- Accountability is for the entire workforce - Sometimes people assume that the finance people by virtue of dealing with accounts need to be accountable. Everyone has to account for what they do, how they do it and why.

- Accountability is pivotal for proper corporate governance - There can never be proper governance of a business without clear accountability structures.

I have watched over the years that situations where I have refused to be accountable, I have slowed down in making the desired progress in life. I remember when I would keep to myself with no one that could speak into my life, at that point I did the most mischievous things in life. Why not? I had no one who could look at me sternly in the face and tell me as it is. My wife taught me how accountability can be achieved through accounting with the way she handled family accounting issues to the last cent. She is one very accountable person I know. Sadly, I still lag behind in this area. I spend first and sometimes forget to keep those concerned informed about my financial actions.

The Types Of Accounting

Accounting is the art of analyzing and interpreting data. It may not be apparent to some but every business and every individual uses accounting in some form. An individual may knowingly or unknowingly use accounting when he evaluates his financial information and relays the results to others. Accounting is an indispensable tool in any business, may it be small or multi-national.

The term "accounting" covers many different types of accounting on the basis of the group or groups served. The following are the types of accounting.

1. Private or Industrial Accounting: This type of accounting refers to accounting activity that is limited only to a single firm. A private accountant provides his skills and services to a single employer and receives salary on an employer-employee basis. The term private is applied to the accountant and the accounting service he renders. The term is used when an employer-employee type of relationship exists even though the employer is some case is a public corporation.

2. Public Accounting: Public accounting refers to the accounting service offered by a public accountant to the general public. When a practitioner-client relationship exists, the accountant is referred to as a public accountant. Public accounting is considered to be more professional than private accounting. Both certified and non certified public accountants can provide public accounting services. Certified accountants can be single practitioners or by partnership ranging in size from two to hundreds of members. The scope of these accounting firms can include local, national and international clientele.

3. Governmental Accounting: Governmental accounting refers to accounting for a branch or unit of government at any level, may it be federal, state, or local. Governmental accounting is very similar to conventional accounting methods. Both the governmental and conventional accounting methods use the double-entry system of accounting and journals and ledgers. The object of government accounting units is to give service rather than make profits. Since profit motive cannot be used as a measure of efficiency in government units, other control measures must be developed. To enhance control, special funds accounting is used. Governmental units can use the services of both private and public accountant just as any business entity.

4. Fiduciary Accounting: Fiduciary accounting lies in the notion of trust. This type of accounting is done by a trustee, administrator, executor, or anyone in a position of trust. His work is to keep the records and prepares the reports. This may be authorized by or under the jurisdiction of a court of law. The fiduciary accountant should seek out and control all property subject to the estate or trust. The concept of proprietorship that is common in the usual types of accounting is non-existent or greatly modified in fiduciary accounting.

5. National Income Accounting: National income accounting uses the economic or social concept in establishing accounting rather than the usual business entity concept. The national income accounting is responsible in providing the public an estimate of the nation's annual purchasing power. The GNP or the gross national product is a related term, which refers to the total market value of all the goods and services produced by a country within a given period of time, usually a calendar year.

Why Should Payroll Accounting Be Outsourced?

Outsourcing the businesses' payroll accounting, is something that all small and medium-sized businessmen should indulge into. Handing over the payroll accounting aspect of the business to a professional service provider offers a series of benefits and advantages. Here are some reasons and tips for outsourcing businesses' payroll accounting, something that every business owner should consider.

-One of the biggest benefits on offer when you outsource your payroll accounting is the fact that they provide guarantee and certification of the fact that your tax will be filed accurately and on time. A lot of businesses regularly suffer fines due to filings that are either late or incorrect. The possibility of this is completely eliminated once you hire a payroll service provider as they take full responsibility of getting things done properly and on time. This saves you a lot of headache and fine money as a business owner.

-Next on list of reasons and tips for outsourcing businesses' payroll accounting is cost cutting. Although these services come at a price, but when compared to the time and money saved in terms of manpower that would otherwise be used if you undertook this process internally, this seems like a more financially viable option and something that makes complete business sense.

-Another feature of outsourcing a businesses' payroll is the fact that this enables direct deposit of paychecks, quite easily and in a convenient manner. Most employees given a choice will prefer the option of direct credit of salaries into their bank accounts and using the expertise of a payroll service provider allows a business to achieve this process in a hassle-free manner without glitches and mistakes. Also, the job of payroll document management as well as personal resolution of paychecks every month that would otherwise have to be done is eliminated.

-One of the most important reasons and tips for outsourcing businesses' payroll accounting is the fact that these payroll providers are always up to date with any changes that are coming up in areas like tax charts etc. This will mean that the possibility of making mistakes on this account by using incorrect reference or outdated information is done away with. This itself is a major advantage and will account to doing away with a lot of headaches for the business owner.

The Purpose of Control Accounts

The reasons for having control accounts are as follows:

1. Check on the accuracy

They provide a check on the accuracy of entries made in the personal accounts in the sales ledger and purchase ledger. It is very easy to make a mistake in posting entries, because there might be hundreds of entries to make. Figures might get transposed. Some entries might be omitted altogether, so that an invoice or a payment transaction does not appear in a personal account as it should. By comparing:

o The total balance on the debtors account with the total of individual balances on the personal accounts in the sales ledger.

o The total balance on the creditors account with the total of individual balances on the personal accounts in the purchase ledger.

It is possible to identify the fact that errors have been made.

2. Location of errors

It could also assist in the location of errors, where posting to the control accounts are made daily or weekly, or even monthly. If a clerk fails to record an invoice or a payment in a personal account, or makes a transaction error, it would be a formidable task to locate the error or errors at the end of a year, say, given the hundreds or thousands of transactions during the year.

By using the control account, a comparison with the individual balances in the sales or purchase ledger can be made for every week or day of the month, and the error found much more quickly than if accounts did not exist.

3. For internal check

Where there is a separate of clerical bookkeeping duties, the control account provides an internal check. The person posting entries to the accounts will act as check on a different person whose job it is to post entries to the sales and purchase ledger accounts.

4. More simply and quickly

To provide debtors and creditors balances more quickly for producing a trial balance or balance sheet. A single balance on a control account is obviously expected simpler and quickly than many individual balances in the sales or purchase ledger.

This means also that the number of accounts in the double entry bookkeeping system can be kept down to a manageable size, since the personal accounts are memorandum accounts only and the control accounts instead provide the accounts required for a double entry system.

Scope of Accounting

Management Accounting and Cost Accounting

Management or cost accounting is a management information system which analysis data to provide information as a basis for managerial action. The concern of a management accountant is to present accounting information in the form most helpful to management.

Financial Accounting

Financial accounting is mainly a method of reporting the results and financial position of a business. It is not primarily concerned with providing information towards the more efficient conduct of a business. This is particularly clear in the context of the published accounts of limited companies. Accounting standards and public law prescribe that a company should produce accounts to be presented to the shareholders.

Financial Management

The financial manager is responsible for raising finance and controlling financial resources. Including the following decisions:

(a) Should the firm borrow from a bank or raise funds by issuing shares?
(b) How much should be paid as a dividend?
(c) Should the firm spend money on new machinery?
(d) How much credit should be given to customers?
(e) How much discount should be given to customers who pay early?

Auditing

The annual accounts of a company must generally be audited by a person independent of a company. In practice, this often means that the members of the company appoint a firm of registered auditors to investigate the financial statements and report as to whether or not they show a true and fair view of the companies results for the year and its financial position at the end of the year.

Qualities of Good Accounting Information

Below are some features that accounting information should have if it is to be useful:

Relevance
Comprehensibility
Reliability
Completeness
Objectivity
Timeliness
Comparability

Financial Accounting Versus Cost Accounting

Before we go to differentiate Financial & Cost Accounting we must have knowledge what these both terms really are. As we define both terms these would automatically be differentiated.

Financial Accounting:

Financial Accounting is a systematical way to prepare the financial statements of an organization is order to get the true and fair view profit or loss. These financial statements are organized for decision making, stockholders, Banker, Supplier, Shareholders, Government Agencies, and other stakeholders. The basic requirement to prepare financial statement is to examine and reduce the dead expenses by measuring the expenses and income status and to reporting the result to interested users. These statements are organized for outsiders who do not take part in day to day organizational activities.

Simply we can say, "Financial accounting is the process which includes recording, interpreting & summarizing date taken from financial records of an organization and bring it out in an annual report for the benefit of people outside the organization".

In depth financial accounting contains some principles, Concepts & Equation.

Financial accountants organize financial statements based on Accounting Principles which are generally accepted by a specific country. Financial statements must be prepared according to the (I FRS) International Financial Reporting Standards.

Accounting Equation: (ASSETS = LIABILITIES + OWNER'S EQUITY).

Accounting Cycle:

1. Voucher.
2. General Journal.
3. General Ledger.
4. Cash Book.
5. Trail Balance.
6. Trading profit & Loss Account.
7. Balance Sheet. Cash Flow Statement.

First of all the transaction occurs and noted in the form called Voucher. All transactions are available in vouchers. Then one specific form is created called General Journal. All transaction recorded in one form. The next step is Called Posting in which all separate heads/accounting recorded separately in different form/accounts called General Ledger. Cash Book is maintained to record the payments and recipes or organization. By the help of General Ledger the Trail Balance prepared which provides the items of Trading, profit & Loss account and Balance Sheet which shows the financial position and the health of the Organization. And lastly Cash Flow Statement is prepared to drive the accrual inflow & outflow of cash.

Cost Accounting:

Cost accounting ascertains budget and actual cost of production, operations, departments, process and the analysis of variance. Cost accounting is used to support decision-making to reduce cost of organization and improve its profitability. Cost accounting does not require standards as (GAAP) Generally Accepted Accounting Principles, as its primary use is for internal management, rather than outside people. Some of managerial accounting approaches are mentioned as under;

• Managerial Costing.
• Activity based Costing.
• Standard Cost Accounting.
• Resource Consumption Accounting.

Three Classical Cost Elements:

• Raw Material.
• Labor.
• Factory Over Head/Indirect Expenses.

Cost Accounting is being used to help the managers to understand & reduce the running cost of an Organization. Most of Cost varied with the rate of production which is called "Variable Cost" like money spent on labor, power to run a factory, direct material etc. Unlikely variable cost, some costs remain the same even while busy period or during null production. These costs are call "Fixed Cost" like Depreciation on Assets, Rent of building etc.

In cost accounting some statements are prepare. Majors are Income Statement, Cost of Goods Sold Statement, and Cost of Production Report.

Income Statement:

Income statement is prepared to drive the net income/profit of the organization. In the process all direct Expenses related to purchase of Goods/material are less from Sale and the retained amount is called Gross Profit. Then all indirect expenses related to sales, Admin & Financial Charges are deducted from (GP) Gross Profit, retained amount after deduction is called (NP) Net Profit/income.

(CGS) Cost of Goods Sold Statement:

Cost of Goods sold statement is prepared to drive the total cost which is spent on the purchasing to sell the produced Goods. In the preparation process first of all the Closing Martial of last year is added in purchase of Martial, which is called "Total Material Available for Use" and Material Used is deducted from it. The remaining amount is called "Cost of Material Consumed". Then the cost of Labor and (FOH) Factory Overhead added in cost of material consumed. The total of this is called "Total Factory Cost" after that Opening stock of work in process is added and closing stock of work in process is deducted from Total Factory Cost. The amount which drives after this is called "Cost of Goods Manufactured". Lastly the Opening Stock of Finished Goods is added and Closing Stock of Finished Goods is deducted from Cost of Goods Manufacture and the Answering amount is Called "(CGS) Cost of Goods Sold"

Working With an Accounting Firm

When tax season rolls around, whether you are filing a w-2 as a private filer, 1098 for self-employed status, or any other forms as a business owner, you have to know where and what to file; for these, and other reasons, you should consider working with a professional accounting firm when the time rolls around for you to begin considering what you will do during tax season. Choosing the right accounting firm is just as important as timely filing, and disclosing all information accurately, so you do have to take some time to find the best firm when you are ready to file.

Consider Your Status

Depending on whether you are filing a basic w-2, or whether you are self-employed, own a business, or are filing under any other status, there are going to be different filing rules for each individual or each entity. Therefore, you must first determine what you are, and what category you fall under, in order to ensure you do find the very best accounting firm to take on your taxes and filing, when the time comes for you to file your taxes with the IRS and any state taxes that you have to file.

Reliable Firms

As a customer, you want to make sure that the accounting firm you work with, is reliable and stands behind their work. When choosing the firm you should consider:

- their expertise, the type of customers they file for, and how long the firm (or private accountant) has been in business;

- the type of clients they work with (private filers, big or small business, etc);

- how many tax forms they do annually, in order to find the most reliable firms;

- the guarantees that are made, and whether the accounting firm is going to stand behind their filing in the event of an audit;

- how many deductions they are going to find for you when the time comes to file; and,

- how much you are going to be charged to file, when the time comes for you to decide on the firm or the private accountant, when tax season rolls around and it is time to pay taxes at the state and at the federal level.

With so many national firms, small local firms, and private accountants to go with, there are no shortages of getting great business if you want to ensure your taxes are properly filed. Although you can use online tax software, these very rarely provide a guarantee in the event you are audited, so if something is done incorrectly, you might be dealing with great repercussions. To avoid this, it is well worth the fee you are going to be paying to the accounting firm, when you do choose to file with a firm as opposed to doing it on your own.

So, taking the time to hire the best firm, and the most reputable accountants, is something all filers should do. When you are ready to file, these are some of the factors you have to consider, to ensure you do choose the best accounting firm to work with.