Accounting

A simple definition of “accounting”

Accounting is how your business records, organizes, and understands its financial information.

Tax accounting

When your accountant provides you with recommendations for how to get the most out of your tax return, that’s tax accounting.

Cost accounting

You’re doing cost accounting whenever you’re trying to figure out how to increase your margin, or deciding if raising prices is a good idea.

Credit accounting

Credit accounting involves analyzing all of a company’s unpaid bills and liabilities and making sure that a company’s cash isn’t constantly tied up in paying for them.

Why accounting matters for your business

Accounting plays a vital role in running a business because it helps you track income and expenditures, ensure statutory compliance, and provide investors, management, and government with quantitative financial information which can be used in making business decision

Accounting helps you plan for growth

Every great journey begins with a roadmap. When you’re planning your company’s growth, it’s essential to set goals. What should your profits look like one year from now? How about in five years?

Accounting is essential for securing a loan

Up-to-date financial statements demonstrate where your company stands. They’re essential if you want to fund your small business with a loan.

You need accounting to get investors or sell your business

You may not be planning to court investors or sell your business right now. But it’s a good idea to leave your options open. And the best way to do that is to put a proper accounting system in place now.

Accounting helps you get paid

When a customer owes you money, it appears as Accounts Receivable (AR) on your balance sheet. This is either prepared by accounting software or your accountant.

Accounting keeps you out of jail (or at least saves you from fines)

As your business grows, it can be difficult to keep track of all your tax information reporting obligations. What’s more, if there are mistakes in your financial reports, you run the risk of misreporting your income. Either mistake could land you in hot water with the IRS.

Accounting helps you pay the right amount of taxes (and not a dollar more)

If you don’t pay your full tax bill, the IRS will fine you. But they won’t give you a gold star for paying too much. You can tell you’re paying too much in taxes if your business is consistently receiving large tax refunds.

What an accountant does?

A skilled accountant will save you time by communicating your company’s financial state to you jargon-free while anticipating your financial needs.

They can also provide you with knowledge and insight that is simply inaccessible to non-accountants. Things like tax deductions you didn’t even know you qualified for, tax rules you didn’t know you were breaking, and best practices picked up while working for other companies in your industry.

Frequently Asked Questions

Some FAQ’s.

While accountants and auditors both work in the financial field, they have different job responsibilities and goals. Accountants are more concerned with daily tasks, such as processing financial information, paying the company’s bills and balancing the books. The position of auditor is higher than that of an accountant. Someone in this role may review the work of a company’s accountants to ensure that it is correct. They are responsible for testing internal controls to determine if they are adequate to prevent errors and monetary loss for the company.

The primary duty of an accountant is to prepare financial records and ensure that they are correct. Some of the specific duties of an accountant include the following:

  • Prepare tax returns.
  • Make sure that the company’s financial statements comply with state and federal laws.
  • Make recommendations to management on ways to decrease costs and increase income.
  • Prepare reports to explain their findings to upper management.
  • Meet with private clients to provide financial advice.

Accountants fall under a number of categories. Some of them work in the private sector and others work in the public sector. These include:

  1. Auditors, keep account of public records. They also analyze and verify financial documents
  2. Forensic Accountants deal with white-collar crimes. They investigate securities fraud and help the courts legal issues.
  3. Tax Accountants are highly trained in the field of taxation. They have the authority to represent individual taxpayers in matters concerning the IRS.
  4. Financial Advisors fall under the category of consultant, and they provide financial advice to individuals or groups.
  5. Controllers manage the accounting departments
  6. Bookkeepers initiate any accounting transactions and turn them into financial statements.
  7. CPAs are another form of accountant and is the most easily recognizable to most individuals. CPAs handle a variety of things pertaining to accounting, some of which include preparing financial reports, making sure that taxes are filed correctly, and overseeing financial records.

The CPA (Certified Public Accountant) certification is one that is extremely difficult to pass, but it is something that accountants may want to look into. Right now, there are still plenty of open positions in the accounting field that do not require one to be a CPA. The public perception is one that encourages a CPA to be hired over someone without a CPA, but some companies really do not care either way.

Many people with degrees in accounting continue to work in the field without the CPA attached to their name. The biggest difference may come in the salary, but there are still plenty of accountants that are doing the same work as CPAs, just in the private sector. Accountants can still work at any number of different agencies doing taxes and working for private companies. There are so many different outlets for people with accounting degrees, and all that it takes is a little perseverance to land the right job.