Accounting – 5 essential things to know
Table of Content:
- What is accounting?
- What does an accountant do?
- What does a bookkeeper do?
- What does an auditor do?
- Financial services
What is accounting?
Accounting is a service that overlooks and verifies financial accounts and managing money transactions. It is a service that can be used by either public institutions, private individuals or businesses.
An accountant is essential to any business they work for, whether it is for a small business or a large corporation. Their primary job is to make sure that every transaction is done under the law of the country they operate in and that they also follow the international guideline standards that are made by the IASB (The International Accounting Standards Board).
What does an accountant do?
There are many areas an accountant can cover for businesses or private individuals but one thing is certain, they will always use numbers and financial statements with their skill in math and finance to describe the financial health of a business or private person.
A lot of people often get confused between bookkeeping, auditing, and accounting.
What does a bookkeeper do?
A bookkeeper constantly keeps the current annual financial books up to date and make sure that tax is paid. They usually do not prepare the financial reports, they just ensure that the figures are maintained for reporting. Bookkeeping and accounting go hand in hand. An accounting company will often have bookkeeping associated with them which take care of the continuous bookkeeping of a business.
What does an auditor do?
An audit works most of the time independently from accountants and bookkeepers. They are responsible for examining the accounts, books, financial statements or anything else that gives a clue to how a company or organisation are doing financially. You can say they are the authority within a company that makes sure everything is done by the book, follows the law and that everything is maintained properly under the international standards.
An external auditor is good to have in a company if the board or management wants a second opinion and evaluation of their companies financial health.
In Malaysia, it is a requirement; all private liability owned companies must have an external audit firm to make a yearly audit report. In many other countries, this is not mandatory until you get to a certain revenue.
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Accounting covers a wide range of financial services. Therefor, when you select your accountant, you will have to know what service it is you want the accountant to assist you with.
Accountants specialised themselves in some areas more then others so if you have more technical issues to solve consulting with only one accountant might not be enough. Sometimes it will be good to find an accounting firm that cover all the fields that you or your business needs help with.
Depending on their specialised field, an accountant will be able to help you with technical tax decisions. Paying more than what is needed in taxes is a shame, and some tax accountants can help minimise the tax payment, which does not mean doing anything illegal.
The right accountant can, if he possesses the right skills and knowledge, save a company a lot of money every year, even for small businesses.
Accountants have many responsibilities but their primary job is to analyse profit and loses providing information to investors and business owners so they can evaluate how the business is doing. The following are some of the areas their expertise can cover:
- Prepare and review budgets giving a clear view of all the expenditures
- Payroll data, which determines the monthly payrolls
- Up hold duo diligence with external or internal auditors
- Financial statements such as: financial position, income, cash flow and changes of equity. All statements that have something to do with PL (profit and loss) and finance
- Deliver cost accounting reports monthly
- Establish procedures to coordinate accounting and risk management
- Overlook entries done by bookkeepers and automated financial IT-systems
- Report to the CFO of a company or a private individual
The list goes on. This is just to give an indication on how much responsibility the accounting firm or accountant person is trusted with.