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What is Accounting?
Accounting is the organized and detailed tracking of financial deals regarding a business, It also relates to the procedure of summarizing, storing, sorting, retrieving, and presenting the information in various reports and analysis. Accounting is one of the key functions for every business. We handle it with utmost care & responsibly for our client. And present the information in the form of financial statements (balance sheet, income statement, etc.) We further help you to compliance with government regulations relating to income tax reporting.
This helps provide a Company’s Management with the information it needs to keep the business financially healthy.
Advantages of Accounting Information
1. Verifiable Data
Data entered in an accounting system is verifiable data and based on generally accepted accounting principles. These are rules to be followed in accounting to make reports standard and comparable. Accounting information is unbiased and not someone’s opinions or wishes.
2. Reliable Data
Another advantage of accounting information is that it is reliable. For example, when you see `40,000 in accounts payable, you owe this much to someone. If you have doubts about that, reports can show you how that number was calculated. Figures do not turn out just like that. To convert it into an accounting system, data must make sense also to have proper records to back it up.
3. Analysis Tool
Accounting reports can be analyzed to provide assistance to management with financial information that can be used to run a business, plan ahead and to make changes when business is not going as expected.
Why Do We Perform Accounting?
Importance of Accounting:
- Accounting is the backbone of the business financial world.
- It’s the only way for business to grow and flourish.
- Accounting gives us the financial snapshot we need in order to make solid business decisions about the current status or projected future health of our businesses.
There are two basic categories of accounting: financial accounting and managerial accounting.
- Financial Accounting – Financial accounting is comprised of information that companies make available to the general public: stockholders, creditors, customers, suppliers, and regulatory commissions.
- Managerial Accounting – Managerial accounting deals with information that is not made public. Information such as salary costs, Cost of goods produced, profit targets, and material control information. The knowledge supplied by managerial accounting is for the use of department heads, division managers, and supervisors to help them make better decisions about the day-to-day operations of the business.
How to Perform a Basic Accounting Audit?
An accounting audit is the process of examining a company’s entire financial situation, with an emphasis on ensuring compliance with relevant reporting standards, and promoting adequate cash handling policies and internal controls.
Performing a Basic Financial Audit
- Ensure your deductions are realistic and not excessive (especially for business meals, travel, and entertainment). For example, daily commuting to work at a regular job is not a valid deduction, nor is claiming any personal expense as a business deduction. A good rule is if the spending is required to make money, then it can be deducted.
- Be sure you have proper receipts and records for any and all deductions.
- Have explanations and proper documentation for any major discrepancies between years. If you contribute much more to charity one year than another, include an explanation as to why when you file your return, and include any receipts or other associated documents.
Creating an Accounting Audit Trail
An accounting audit trail consists of the paper and electronic sources that document the history of a business’s transactions.
- The first step in your small business’s accounting audit consists of gathering financial documents, such as invoices, receipts, and bank statements, and handing them off to the accountant or accounting department for processing. If this process is slow or unreliable, the accounting records will suffer and become unreliable.
- Employ accounting software to create an electronic accounting audit trail for your business. Using accounting software to log your business’s financial activities will allow you to easily store and analyze accounting data with ease.
Conducting an Internal Accounting Audit
Good audit practices should serve as your initial guide for conducting your internal accounting audit.
- Review each place into which accounting information is input, including the general journal, the general ledger, and individual account balances. Account balances should be examined on a continual basis, rather than just before preparing the trial balance at the end of the accounting period.
- Use accounting documentation to verify your business’s gross income, expenses and costs.
- Check the fidelity of your own bookkeeping by comparing it against external records. For example, you can compare purchase receipts from your suppliers against your own purchase records.
- Look through your recent government tax receipts and compare these against your internal records regarding taxes paid and tax liabilities.
- Compile a list of your findings into a succinct audit report. An audit report is simply a document that summarizes the findings of your audit. It will state problems you found, improvements that were made, and areas that were working well.
How to Perform Accounting?
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