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The Fundamental Concepts Of Accounting

The Federal Election was held in Australia on 21st of August 2010. During the rather boring election campaign there were questions raised by the major parties, and everyone else for that matter, on how the elected government would go about accounting for the very large amounts of money they receive and spend. These people talk in billions of dollars. It is rather mind-boggling but the accounting system they use can also be applied to small business and personal finances.

Most households require some form of accounting to deal with their personal financial matters. You are probably aware of the saying that the only thing that is certain in this life is death and taxes. I think that it is fair to say that accounting affects the lives of everyone in some way in a modern society.

I have always thought of an accountant as someone who processed the financial data I prepared for them and submitted my annual income tax return required by the Australian Taxation Office (ATO). Their value was measured by the amount of money they could magically retrieve from the ATO by minimizing the amount of tax I was required to pay. This view is shared by many who see accountants as nothing more than bookkeepers, ‘number crunchers’ or ‘bean counters’. Unfortunately accountants are not magicians and the reports they prepare must stand up to the scrutiny of the ATO. The accountant should therefore be perceived as a professional who is able to minimize income tax by applying his talent and know-how acquired through years of study and experience

The accountant must abide by the rules. There are no two ways about that. The terms of reference are set out in:
* Income Tax Assessment Act 1936 and 1997.
* Corporation Act 2001.

If the accountant fails to follow the laws made by our society, he/she will be punished. Accounting is a discipline and is extremely important to any financially healthy entity. Inadequate records normally accompanies business failure and in some cases bankruptcy. Accountants provide information to the owners and managers of a business or company so that appropriate decisions can be made on purchases and investments. This is achieved by processing records, interpreting these records and reporting the findings from these records to these decision-makers in monetary terms.

The role of the accountant is always changing due to legislative changes and technological developments. Accountants are spoilt for choice when selecting an area in which to specialize. There are many opportunities in private business, government bodies or institutions. Some examples of the career paths an accountant may choose to pursue include:
* Taxation
* Auditing
* Budgeting
* Cost Accounting
* Management Advisory Services
* Financial Planning
* Forensic Accounting.

There are professional accounting associations available with entry qualifications and the aim of these associations is to keep its members up to date with new developments. In Australia the longest established associations are the:
* Institute of Chartered Accountants (ICA)
* CPA (formerly known as the Australian Society Of Accountants)
* The National Institute of Accountants (NIA) incorporating The Association Of Accounting Technicians (AAT).

These associations have had a significant effect on the development of accounting in Australia. Its members are expected to abide by the pronouncements made by these associations as good accounting practices. Members are also expected to undertake a certain amount of professional development each year as it is vital that accounting keeps pace with the needs of those it serves.

The increase in the size of organizations means that it is impossible for a manager to keep in touch with all that is going on. This is the reason for the development of the role of an accountant in a management team. The growth of collective ownership rather than individual ownership has meant that the function of the accountant has been extended to preparing financial reports for shareholders and people outside of the businesses they are involved in. Fortunately, computer technology has enabled the saving of a lot of time and energy and the production of more accurate and detailed information.

Accounting is continually affected by legislation, technology, economic conditions and professional associations. It is these changes that has molded this profession into the sometimes nerve racking but essentially rewarding profession it is today.

Self Employed Accounting Software Review And Importance

The best choice is often dependent upon the size of the business and the employment of full time accountants, accounting staff, bookkeepers or management of the accounting records by the proprietor. Every business needs to choose the most appropriate accounts package according to both the requirements of the business and the capabilities of the person or people who will operate the accounting solution.

Many small businesses do not benefit from sophisticated accounting software if the technical requirements of that software exceed the abilities of the users to produce efficient financial records and use the full capabilities of the accounting software to maintain a high level of financial control.

Alternatively a simple bookkeeping package may not offer the degree of financial control over such financial matters as debtors and credit control, creditors and cash flow liquidity that may be required. Financial control and cash flow is of supreme significance and importance when credit is tight.

Every business needs to maintain a set of books and accounts to satisfy the legal obligations to calculate the net taxable profit which has to be both declared to the taxation authority and provide sufficient financial records to support that calculation.

Up until the mid twentieth century it was common practise to produce accounts handwritten on paper, Typing being reserved for the final set of accounts for publication as required. Handwritten accounting records are largely obsolete for medium and larger businesses although still used by many small business organisations.

With the advent of computers accounting software has become the norm and there are many simple bookkeeping packages that can be easy to understand and offer sufficient levels of financial control for even the smallest business.

In essence each small business has a choice between preparing a handwritten set of accounts, using a simple bookkeeping package which could be based upon spreadsheets or a more sophisticated accounting software package that almost invariably use a data entry system into a database which can then be queried to produce the required financial control.

Choosing handwritten accounts would only be applicable to the smallest business where the proprietor had no employees, limited numbers of transactions and had full financial control without the need for written information. Such handwritten accounts would not be suitable for any business that required control over debtors and creditors or that needed to produce a balance sheet.

For those businesses that could suffice with handwritten accounts there are better options available such as using computer spreadsheets. Minimal knowledge would be required and the benefits substantial compared with being handwritten.

An accounting package based upon computer spreadsheets is suitable for most small business as it can be no more difficult than maintaining handwritten accounts but in an organised format. The sophistication of the format would be according to the ability of the designer of the accounting solution or the bookkeeping knowledge of the person preparing the accounts.

Accounting software written on computer spreadsheets have advantages in that they can save time in data entry, improve accuracy, can be changed to correct errors, highly visible and provide all the basic bookkeeping needs of a small business. Accounting solutions written on spreadsheets are normally limited in relation to financial control and medium sized businesses that require additional control over debtors and creditors may be more suited to a database accounting software system.

Generally if a business is large enough to employ a full time bookkeeper or accountant then that business potentially has the accounting knowledge and skills within the accounting function to use a database accounting system and achieve the additional financial control elements which become available.

Accounting software that uses a database has the facility to produce regular financial and tax reports, debtors reports and statements, creditors reports and statements, cash flow statements and a set of monthly and final accounting reports such as profit and loss accounts and balance sheets.

The disadvantage of such accounting solutions is that to get the most and best out of the system you also need to understand how the package works and how technically to obtain from it the benefits of increased financial control that are available.

The main priority in choosing any accounting package is to first determine the final requirements you need from that administrative system. If detailed financial control, particularly over individual supplier or client accounts is essential and the business is large enough to employ office based staff including an accountant or full time bookkeeper then a database system may be the appropriate choice.

If the business is smaller and requires detailed accounting records to support the year end financial statements while financial control is already sufficient to be in the hands of the business owner then accounting software based upon spreadsheets would probably be adequate. The degree of adequacy being dependent upon the level of expertise contained and automated within the accounts program.

Handwritten books would be the lowest choice. Adequate for some small businesses but only suitable if a computer based option was impossible.

Payroll Management Software Puts an End to Traditional Accounting Issues

There have been several drawbacks of traditional or manual payroll system; hence, the need of software based solution is dire. The software has numerous features which aid accounting professionals within office greatly.

Accounting tools which are powered by software technologies perfect solution to put an end to all the manual errors those had been affecting the financial progress of an organization. At times, these issues had questioned the reputation of the business enterprises due to the frequency of calculative errors whether they were caused deliberately as a result of favouritism or just humanly mistakes of calculations. It is essential to manage employees’ salary in a glitch-free manner. Hence, it becomes essential to install new age solutions to aid accounting personnel as well as leaving no room for problems related to payroll.

There are varied types of software utilized for managing payroll, yet, your unique business requisites call for customization of the same. In addition to this, you have to make it a point that all the features supported by payroll management software are totally compatible to your corporate pattern. In simple to comprehend terms, you might have policies of compensation, incentives, allowances, deductions or similar factors which other business owner would not necessarily support. Thus, the software you get designed must have particulars with respect to your business in totality. Let us now highlight few of the salient features of this software meant for management of payroll:

Create unlimited users according to the various units of company: It hardly matters whether your company has several branches, units or domains, with the help of HR payroll software, unlimited user range can be defined.

Login manager can determine users along with specified rights: The official who controls the administrative system can determine users and specify rights of accessibility according to the demand of situation. This factor of payroll management system is in turn an enhanced solution which makes sure that none of the unauthorized individual can tamper confidential information.

Tailor-made solution with accurate functionality: It is obvious that if any solution is functional, only then could you make the optimal use out of it. Therefore, HR Software Solutions Private Limited supports tailor-made HR payroll software which is designed by the professionals with rich industrial experience in IT domain. Thus, their dexterity and readily adaptability to distinct business needs enables them to come up with accurate business solutions.

100% automation minimized manual effort: The software constitutes of user-friendly interface which indeed has 100% automation system to manage leave deduction, incentives or related components before actually coming up with the final payroll. Hence, the payroll management software is a revolution in the sphere of accounting which minimizes manual effort. Furthermore, it is a time-saver element that helps officials to accomplish their target efficiently.

Reporting is also focused on effectually: Comprehensive reporting is which you might want your accounting officials to present in accord to payroll. Thus, this software is ideal investment as it has capability to serve the purpose of preparing comprehensive report smoothly.

In a nutshell, it can be summed up that this payroll software is a must add-on to the resources of business entities for attracting appropriate financial solution.

Hr Payroll Software Delhi developed by HR Software Solutions is regarded as one of the best and easy to use software comprising of Payroll management system Delhi both windows and web based modules.

Types Of Tax Accounting

Unlike Generally Accepted Accounting Principles(GAAP), tax accounting is an extensive set of laws and regulations required of businesses to submit income tax information. Just like federal income tax, this set of comprehensive accounting principles is regulated at the national level.

As of the 2008 fiscal year, there are only a few different ways to compile tax accounting information, but 2 main methods. The acceptable ways of submitting information are the cash method, accrual method, or a combination of both.

Depending on qualification, these different methods can be chosen by a company according to timing of transactions such as credits and debits. If qualified for either method, the company will look at the advantages and disadvantages of each method and choose the most beneficial method. The American Institute of Certified Public Accountants(AICPA) submitted a request to change the accounting method, but nothing has been overturned as of yet.

There are two parameters that a business must not qualify for to have the ability to choose their tax accounting method . A business must use the accrual method if the sales are over $5 million or there is inventory stockpiled that will either be sold to the public or used to make products sold to the public.

The accrual method, or accrual basis, of tax accounting records sales and purchases as the order is processed. In this method, physically receiving or paying money is not the time of recording. When a sale is made or a job is completed the credits or debits are recorded, regardless of the money actually changing hands or not. This method is simpler when large contracts are signed, but the payment plan may last several years. One disadvantage would be that even though the books show a large capital, the actual funds are not in the account.

The cash method, or cash basis, of tax accounting is simply recording transactions as the money is exchanged. This method is more accurate and gives a better feel for how much spendable capital a business has to use. Depending on the set-up of the business procedure, the cash method takes a little more discipline in book keeping. Unlike the accrual method that records the transaction as the order is processed in the office, in cash accounting the payment must be recorded directly after payment is taken. The cash method can also leave a window for fraud or theft, whereas accrual accounting has checks and balances to make sure the correct amount of payment is applied for each order.

So, after determining if your business is required to use the accrual method or not, it has a choice. The choice depends on the structure of the business and the preferences of advantages and disadvantages of each method.

It is important to note that a business is not allowed to change tax accounting methods back and forth. If a change is desired, the current method must have been used for the last two consecutive years. At that time, a formal request must be submitted to the Secretary of the Treasury. To make sure this process is done correctly and all the bases are covered, the owner/officer of the business should consult with a certified public accountant. The Secretary of the Treasury also has the right to require a business to re-compute the taxable income to more accurately show a business’s tax accounting.

In summary, tax accounting requires careful analysis and application of the tax code, regulation provisions, administrative pronouncements, and case law. It is possible and sometimes more advantageous to complete this process in-house or with the aid of online accounting , but it is recommended for some businesses to seek professional guidance.

Asset Finance Leasing A Primer

Asset finance is a boon to small and medium enterprises as it saves them precious working capital and helps them to improve their cash flow by letting them lease/hire expensive business critical assets rather than buying them outright.

In general asset finance is available through two routes – hire purchase and leasing. Under a hire purchase arrangement, the ownership gets transferred to the customer at the end of the hiring period while in a leasing arrangement the customer must return the equipment back to the leasing company.

In both the options, the customers must pay an agreed monthly or quarterly rental for the length of hiring/leasing period. In this article we will talk about leasing and its various aspects.

This non-transferring of the ownership is the fundamental characteristic of the lease arrangement. During the period of lease, the customer pays monthly or quarterly (or whatever is agreed) to the leasing company. This rental payout is deductible from income in some cases (except for a finance lease).

There are various types of leasing:

Finance Leasing
This comes closest to the hire purchase option of asset financing with one major difference the ownership of the asset doesnt get transferred to the business customer at any point of leasing period.

In this arrangement the customer pays the full cost of the equipment, plus the charges in the form of lease rentals over the period of the lease. The customer also gets to bear risks and enjoy benefits usually associated with the ownership without actually owning the asset he must bear the maintenance and insurance cost of the asset and will have to treat the asset as a capital asset in the balance sheet.

At the end of the lease term, usually the asset in question is re-leased to the customer at much reduced payments or is sold second-hand to an unrelated third party.

Operating Leasing
While the term for a finance lease is long, an operating leasing is usually resorted to if the need of equipment is for a shorter period. Here the full cost of the equipment is not recovered and at the end of the lease term, usually the equipment is leased to some other customer or is sold second-hand.

This type of lease is fairly common for cars and construction equipment for whom there is a mature and ready second-hand market. The usual period is of two to three years or longer, but always short of the working life of the asset. The leased asset would not go in the balance sheet as part of capital assets. Rather the lease expenses will be treated as deductible expenses in the income statement.

Contract Hire
This is a variation of an operating lease and is mostly used for vehicles. With this option the customer gets the chance to use the new asset without bearing the risks associated with ownership. Here leasing companies agree to bear some part of the management and maintenance expenses. You need to work out full details with the leasing company.

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