Why do we need a Professional Accountant?

by Anna Eliza Business Advisor

Summary: Accounting is one of the most important pillars of a successful business organization. It can be divided into four different categories such as government accounting, public accounting, management accounting, and auditing. There is a wide range of accounting services that a professional accountant can provide, such as bookkeeping, payroll services, taxation accounting, chartered accounting, bank reconciliation, auditing, cash flow management, payable accounts, and accounts receivable. The accounting cycle starts with bookkeeping and ends with creating the final financial statement. The financial statement of a business can help you in understanding the condition of the business. So, hiring a professional accounting service is beneficial for business for several reasons like it can help in determining the business performance and creating future projections.

Accounting can be defined as the systematic recording of the business transactions of a particular business enterprise. Apart from businesses, it is also used by the government, small business forensics, and so on.

Accounting services are of extreme importance to running a business successfully. An accountant keeps a record of all the incomes & expenditures and provides helpful financial information to the government, management, and investors which can be used in making significant business decisions and deals.

Categories of Accounting

Accounting can be categorized into 4 major types. They are :

Government Accounting
Public Accounting
Management Accounting
Auditing

Government accounting is necessary to track the financial transaction of government bodies. Government accounting services are used to make sure that all the revenues generated and the expenditures conducted are as per the regulation. Government accountants are responsible for creating the government budget as well as for managing assets.

Public accounting is the most extensive type of accounting and includes financial analysis bookkeeping, taxation, and account management. Accountants help in detecting errors, managing payroll, employee compensation, taxes, and so on.

In the case of management accounting, the accountant analyzes and records financial data of the business and helps in the assessment management, evaluating business performance, managing costs, and budgeting.

In auditing, the accountant checks if your business transactions abide by the rules and regulations. It also includes the inspection of financial waste, mismanagement, fraud, and so on. Accountants can have expertise in various types of auditing such as technology auditing, compliance auditing as well as environmental auditing

What are the various Accounting Services Conducted by a Professional Accountant?

Accountants can perform a wide range of services such as:

Bookkeeping: Bookkeeping is the recording of the daily transactions of a business. It can include recording of payments, sales, expenses, and so on. A bookkeeper makes use of accounting software to keep financial data recorded in a structured form. People are generally confused between bookkeeping and accounting. Booking is a part of accounting. Accountants use the data recorded via bookkeeping for giving financial insights and to help the business in making important business decisions based on the recorded data.
Payroll Services: Payroll is one of the strongest pillars of a successful business. It involves the compensation that the business firm pays to its employees for providing their services to the company. An accountant helps in maintaining the record of the bonuses, incomes, and deductions of the employees of the company.
Taxation Accounting: Tax accounting is a set of accounting methods that are based on taxes such as income tax, VAT, and other tax assets related to the business. The job of a tax accountant is to give the most appropriate tax advice regarding claims. They also help in protecting the enterprise from unnecessary tax payments. They also solve issues about filing returns.
Chartered accounting: Chartered accounting is an important accounting service for sections of business and finance such as general management, taxation, and auditing and usually works in government or financial entities.
Bank reconciliation: This is a procedure in which a business organization has to reconcile the account balance that is recorded by the company via bookkeeping to the account balance reported by a bank or financial institution in their bank statement. An accountant makes sure that there is no discrepancy in the process and thus, saves the company from fraud.
Auditing: Auditing can help in providing detailed and important financial information. Accountants perform auditing to make sure that all the recorded financial data are accurate and can be used for future references in taking major business decisions.
Cashflow Management: This is one of the most important services provided by an accountant. Cashflow management helps in determining the money that is coming in and going out from a business. It is also necessary to predict the amount that will be left with the enterprise for future use. Moreover, cash flow management is also important for understanding how much finances are required for paying a debt or for paying employees, and so on.
Payable accounts: Payable accounts can be described as the amount that the company owes to the suppliers for the services or the goods the company has taken on credit. An accountant helps the business by providing expenditure solutions and other financial transactions, preventing duplication, and managing finance documents.
Accounts receivable: An accountant helps in managing receivable accounts. Receivable accounts are the money that is due to the business organizations for the services that have been delivered to the customers but have the customers have not paid for it yet.

What is Meant by Accounting Cycle?

Accounting starts with recording the financial transactions of a business organization. Anything that involves the exchange of money in a business is to be uploaded to the general ledger of the company for future reference. The accounting cycle starts with bookkeeping where the accountant records every day-to-day transaction of the business for using the data in the future. The data that is recorded can be used to determine the position of the business, its improvement, the money left for future use, taxes, outsourced payroll, and so on.

The accounting cycle involves six major steps :

Analyzing all kinds of business transactions and collecting them. The accountant collects all sorts of invoices, bank statements as well as receipts to keep a track of the credit flow from the business.
The next step is to record those transactions in the jour. This is the most important and the most time-consuming process. The accountant has to record all kinds of financial transactions via single-entry accounting or double-entry accounting. In the case of single-entry accounting, only the expenditures or the revenues of the business are recorded. In general, most businesses prefer double-entry accounts which give a clear view of where the money is coming from and where it is going.
In the next step, the accountant prepares the trial balance. Where he or she prepares a list of all the business accounts and calculates the balances.
Thereafter, adjustments can be made by adding adjustments entries if required. For instance, if a customer is not being able to pay the price for a particular product or service. You can give him a discount of 10% to make it affordable for him and the accountant will that discount on the list of adjustments entries.
Next, the trial balance for the adjustment entities is prepared and the recordings are ready to be converted to financial statements.
Finally, all the recorded entities are used to prepare the financial statement. The financial statement that is prepared gives an overall idea of the financial transactions of the enterprise. It can help in analyzing how profitable the business is and gives an idea of how it is going to perform in the coming years.

Why Keep a Record of your Financial Transactions?

The financial records of your business help in generating three important states which determine the performance of your business. The financial records that the accountant mention can generate 3 significant statements- the income statement, the balance sheet and the cash flow statement. Income statements tell you about the profits and losses your business is facing. The balance sheet tells you about the financial position of the enterprise on the given date. Finally, the cash flow statement which acts as the bridge between the balance sheet and the income statement to give a clear picture of the money spent and money generated within a particular period.

These are various reasons for you to keep your financial transactions recorded.

For ensuring statutory compliance: Keeping a record of your business transactions can be beneficial in ensuring statutory compliance. An accountant helps you to address your taxation, pension funds, and VAT more accurately.
To evaluate the business performance: We can easily determine the performance of your business financially if you have clear records of all your business transactions. With accounting services, you can easily track the debts, the gross margin, and the expenses and also help in comparing current performance with the performance made in the previous year to have an idea of the improvement.
For filling up the financial statements: Many business organizations need to file their financial recordings with the registrar. These filing can include taxation, stock exchanges, and other financial exchanges.

To create future projections and determine the budget: To make your business successful, you need to put extra effort into the budgeting needs and future projections. Financial data plays a major role in making important business dealing as well as business projections and it is not possible to access financial data at the required time if it is not recorded for future use.

Thus, we can say that accounting is an integral part of a business, and accounting services can help are of extreme importance for understanding the position of a business. It can help businesses in making important business deals and undertaking major projects that can help the business reach the heights of success in the future.

Businesses in Coventry and other regions in the UK have been majorly hiring professional accountants and accounting services for dealing with their business transactions and concentrating on other important segments to carry out all the business proceedings smoothly.