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Types of Accounting Information

Types of Accounting Information
Types of accounting information may be classified into four categories: Operating informationFinancial accounting informationManagement accounting information andCost accounting information 1. Operating Information: This is the kind of  information which is required to conduct the day-to-day activities. Examples of operating information are: Amount of wages paid and payable to employeesInformation about the stock of finished goods available for sale andEach one’s cost and selling priceInformation about amounts owed to and owing by the business enterpriseInformation about stock of raw materials, spare parts and accessories and so on. By far, the largest quantity of accounting information provides the raw data (input) for financial accounting, management accounting and cost accounting.  Spend Wisely 2. Financial Accounting: Financial accounting information is meant both for owners and managers and also for the use of individuals and agencies external to the business. This accounting is concerned with the recording of transactions for a business enterprise and the periodic preparation of various reports from such records. The records may be for general purpose or for a special purpose. Focus on the Long Term  3. Management Accounting: Management accounting makes use of  both historical and estimated data in assisting management in daily operations and in planning for future operations. It deals with specific problems that is faced by enterprise managers at various organizational levels. The management accountant is often concerned with finding alternative courses of action and then helping to select the best one. For e.g. The accountant may help the finance manager in preparing plans for future financing or may help the sales manager in deciding the selling price to be fixed on a new product by providing suitable data. Generally management accounting information is used in three important management functions: ControlCo-ordination andPlanning 4. Marginal costing This is an important technique of management accounting which provides multi dimensional information that helps in  decision making. Specialised Accounting Fields A number of specialized fields in accounting also have evolved besides financial accounting. Management accounting and cost accounting are the result of rapid technological advances and enhanced economic growth. The most important among them are explained below: 1. Tax Accounting: Tax accounting is all about the filing of tax returns and the consideration of the tax implications of proposed business transactions or alternative courses of action. Accountants specializing in this branch of accounting are familiar with the tax laws affecting their employer or clients and are up to date on administrative regulations and court decisions on tax cases. 2. International Accounting: This accounting is concerned with the special issues associated with the international trade of multinational business organizations or MNC’s. Accountants specializing in this area must be familiar with the influences that custom, law and taxation of various countries bring to bear on international operations and accounting principles. 3. Social Responsibility Accounting: This branch is the newest field of accounting and is the most difficult to describe. Social responsibility accounting is so called because it not only measures the economic effects of business decisions but also their social effects, which have previously been considered to be immeasurable. Social accounting is also known as social accounting and auditing, social and environmental accounting, corporate social reporting, corporate social responsibility reporting, non-financial reporting or accounting. Benefits of Social Accounting 4. Inflation Accounting: Inflation accounting is a term describing a range of accounting models designed to correct problems arising from historical cost accounting in the presence of highinflation and hyperinflation. Inflation accounting is used in countries experiencing high inflation or hyperinflation. 5. Human Resources Accounting: Human resource accounting is the process of identifying and reporting investments made in the human resources of an organization that are presently unaccounted for in the conventional accounting practices. It is an extension of standard accounting principles. This system of accounting...
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What is Accounting Cycle

What is Accounting Cycle
Financial statements have to be produced accurately at the end of the accounting period for tax purposes. An accounting period may be a month, a quarter of a year, or a whole year. The accounting cycle is the series of steps that take place in order to produce  financial statements. A term that describes the steps when processing transactions (analyzing, journalizing, posting, preparing trial balances, adjusting, preparing financial statements) in a manual accounting system. Today many of the steps occur simultaneously when using accounting software. Following are the steps that complete an accounting cycle: Identify the transaction: This transaction could be the revenue from the sale of a product or a payment to another business for services. Analyze the transaction and how it is related to the accounting balance sheet. For example, determine which accounts are affected by the transaction and how they are affected. Record the transaction to a journal such as a sales journal.  Journals are kept in chronological order and may be updated continuously, daily, or however often it is necessary. Record the transaction to the general ledger: Take all of your entries and categorize them by the account. Perform a trial balance: Debits and credits need to be equal at the end of an accounting cycle, so calculate the entries to ensure they match. Prepare adjustments: Just because entries are recognized, does not mean the work has been performed. Revenue can only be recognized when the work has been completed, so adjust the entries accordingly. Perform trial balance with adjustments: Take the adjustments from Step 6 and prepare a trial balance. If the debits and credits do not match, then you need to adjust them to make sure they do match. Prepare financial statements: From the adjusted trial balance, these corrected balances are used to prepare the financial statements. Close the accounts in preparation of the next accounting cycle. Revenues and expenses need to be closed out, which means they need to have zero balances. Balances are moved to the next cycle. Some Important Accounting Terms: Account A record in the general ledger that is used to collect and store similar information. For example, a company will have a Cash account in which every transaction involving cash is recorded. A company selling merchandise on credit will record these sales in a Sales account and in an Accounts Receivable account. Accounting Department Part of a company’s administration that is responsible for preparing the financial statements, maintaining the general ledger, paying bills, billing customers, payroll, cost accounting, financial analysis, and more. The head of the accounting department often has the title of controller. Accounting Equation Assets = Liabilities + Owner’s Equity. For a corporation the equation is Assets = Liabilities + Stockholders’ Equity. For a nonprofit organization the accounting equation is Assets = Liabilities + Net Assets. Because of double-entry accounting this equation should be in balance at all times. The accounting equation is expressed in the financial statement known as the balance sheet. Accounts Payable This current liability account will show the amount a company owes for items or services purchased on credit and for which there was not a promissory note. This account is often referred to as trade payables (as opposed to notes payable, interest payable, etc.) Accounts Receivable A current asset resulting from selling goods or services on credit (on account). Invoice terms such as (a) net 30 days or (b) 2/10, n/30 signify that a sale was made on account and was not a cash sale. Adjusting Entries Journal entries usually dated the last day of the accounting period to bring the balance sheet and income statement up to date on an accrual basis (as required by the matching principle and...
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Functions of A Finance Manager

Functions of A Finance Manager
The Key Functions of A Finance Manager Finance manager is one of the important role-players in the domain of finance function. He must have a complete know-how on the areas of accounting, finance, economics and management. His position calls for judicious capability and analytical approach to solve various problems related to finance. A person who deals with finance related activities may be called finance manager. “Focus on a few key objectives … I only have three things to do. I have to choose the right people, allocate the right number of dollars, and transmit ideas from one division to another with the speed of light. So I’m really in the business of being the gatekeeper and the transmitter of ideas.” – Jack Welch Finance manager performs the following major functions: Forecasting Financial Requirements It is the principal function of the Finance Manager where he is required to estimate the financial obligations of the business concern. He should evaluate how much finances are required to procure fixed assets and forecast the amount needed to meet the working capital requirements in future. 10 Ways to Become Financially Stable Acquiring Necessary Capital The next step of a finance manager is to focus on how the finance is deployed and where it will be available.  The Beginner’s Guide to Budgeting Investment Decision Best investment alternatives have to be considered to assure reasonable and stable return from the investment. He must be competent in the field of capital budgeting techniques to govern the effective utilization of investment. The finance manager must attach more importance to the principles of safety, liquidity and profitability while investing capital. 9 Personal Finance Milestones Everyone Should Reach Before 30  Cash Management Cash management plays a major role in the area of finance because proper cash management also helps to meet the short-term liquidity position of the concern.  5 Ways to Combine Finances with Your Spouse Interrelation with Other Departments Finance manager handles various functional departments such as marketing, production, personnel, system, research, development, etc. He must maintain a good rapport with all the functional departments of the business organization. “Rule No. 1 : Never lose money. Rule No. 2 : Never forget Rule No. 1.” ― Warren Buffett Follow ManagementGuru Net’s board FINANCIAL MANAGEMENT on...
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Need a Business Idea? BI #1

Need a Business Idea? BI #1
Best New Business Ideas for 2020 Accountant Create a flier outlining your services. Before you do that, you need to know what those services will be. Do you want to simply do bookkeeping for a small business? A more involved level of accounting would be do actually work up balance sheets, income statements, and other financial reports on a monthly, quarterly, and/or annual basis, depending on the needs of the business. Other specializations can include tax accounting, a huge area of potential work. Many business owners don’t mind keeping their own day-to-day bookkeeping records but would rather get professional help with their taxes. Most small businesses don’t have a full-time accountant, so the task of record keeping often falls to the business owner. A highly organized, trustworthy, part-time bookkeeper can really alleviate the stress of sorting through receipts and tax returns. You’ll most likely only need to put in one or two days a month for each client, depending on how many sales and expenses they have. Knowledge of QuickBooks is a plus, but not necessarily a requirement for, this side business. And if you don’t already have a relevant degree, you can take bookkeeping classes at a local community college. You can also become a certified bookkeeper through organizations like the National Association of Certified Professional Bookkeepers. Read on: A well researched article on “Small business ideas that’ll make you money” by Dawn Matthews  that throws light on realistic business ideas that’ll work out in the long run. It’s the year of the entrepreneur. Thanks, in part, to social media, crowdfunding and alternative lending options, and the constant evolution of technology, it’s a great time to start a business. Here is a great post on “Some very specific mistakes which can create big problems for Small Businesses“, compiled by John Hawthorne based on his research and experience. Read the Article for great insights on how branding has to be done the right way ! Avoiding Typical Small Business Branding Mistakes | David Taylor Design Many small businesses find themselves struggling to stay on top of all their tasks, from accounting to marketing to sales. They know that small business branding is important, but find it difficult to set aside the necessary time to systematically create their brand. Attractive Business Ideas for Accountants Some of the most important business ideas for accountants are given as under. Bookkeeping: Bookkeeping is a lucrative business alternative for accountants. Both and small business firms require to maintain updated bookkeeping. With the availability of various software and computers equipped with the latest technology, bookkeeping has become easier than before. Accountants can engage themselves educational bookkeeping, this kind of business venture require both experience and education which the accountants usually have. Payroll Service: Payroll service which is a subsidiary of bookkeeping service is a very good business idea for accountants. Payroll services are necessary for most of the companies, and accountants can engage themselves into this kind of service which will help them earn good profits. Tax preparation: Tax preparation service can prove to be a very fruitful business idea for the accountants, for this kind of business grows very easily and appeals to numerous clients. Accountants taking tax preparation service as a business plan means that both individuals and firms will act as clients. Hope you found this article informative and useful…. Leave your feedback and...
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Advantages of Long Term Financing

Advantages of Long Term Financing
Long Term Financing Advantages Before delving into the details of long term financing I would like to present you few fascinating facts on the economy that will blow your mind. A Clear Perspective on Break Even Analysis Dell “has spent more money on share repurchases than it earned throughout its life as a public company,” writes Floyd Norris of The New York Times. According to Forbes, if a Google employee passes away, “their surviving spouse or domestic partner will receive a check for 50% of their salary every year for the next decade.” Start with a dollar. Double it every day. In 48 days you’ll own every financial asset that exists on the planet — about $200 trillion. Wow… According to Bloomberg, “Americans have missed out on almost $200 billion of stock gains as they drained money from the market in the past four years, haunted by the financial crisis. The “stock market” began in May 17th, 1792 when 24 stock brokers and merchants signed the Buttonwood Agreement. The Securities Exchange Act of 1934 creates the Securities and Exchange Commission, charged with the responsibility of preventing fraud and to require companies provide full disclosure to investors. Wall Street was laid out behind a 12-foot-high wood stockade across lower Manhattan in 1685. The stockade was built to protect the Dutch settlers from British and Native American attacks. Financial Markets and Securities What is Long term financing? It is a form of financing that is provided for a period of more than a year to those business entities that face a shortage of capital. Sources of Long-term Finance Long-term loans (External) Issue of shares or equity Sale and leaseback (Internal) Retained profit Examples of long-term financing include – a 30 year mortgage or a 10-year Treasury note. Purpose of Long Term Finance: To finance fixed assets. To finance the permanent part of working capital. Expansion of companies. Increasing facilities. Construction projects on a big scale. Provide capital for funding the operations. Factors determining Long-term Financial Requirements: Nature of Business Nature of Goods produced Technology used Let us look at some of the advantages of going for a long term financing option: Debt is the cheapest source of long-term financing. It is the least costly because interest on debt is tax-deductible, bondholders or creditors consider debt as a relatively less risky investment and require lower return. Debt financing provides sufficient flexibility in the financial/capital structure of the company. In case of over capitalization, the company can redeem the debt to balance its capitalization. Bondholders are creditors and have no interference in business operations because they are not entitled to vote. The company can enjoy tax saving on interest on debt. Disadvantages Of Long-Term Debt Financing Interest on debt is permanent burden to the company:  Company has to pay the interest to bondholders or creditors at fixed rate whether it earns profit or not. It is legally liable to pay interest on debt. Debt usually has a fixed maturity date. Therefore, the financial officer must make provision for repayment of debt. Debt is the most risky source of long-term financing. Company must pay interest and principal at specified time. Non-payment of interest and principal on time take the company into bankruptcy.  Debenture indentures may contain restrictive covenants which may limit the company’s operating flexibility in future. Only large scale, creditworthy firm, whose assets are good for collateral can raise capital from long-term debt. There are a number of ways to finance a business using debt or equity. Though the first choice of  many small-business owners would be equity, they may also prefer to utilize some type of debt to fund the business rather than take on additional...
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