The accounting functions they generally relate to the fact that the accounts and financial statements of the company maintain a good functioning depending on whether it can maintain its stability.
What are the accounting functions in a company or organization
The accounting functions They are of responsibility and it is for this reason the essential thing that means its inclusion in any company or business.
In fact, from keeping the accounting, it is possible to know the accounting movements that are carried out in a company, when reviewing and studying the data and from this control and make decisions in the company, because without accounting it would be impossible to know the data economic that are related to the company or business, but as there are different types of accounting, each one fulfills different functions, for example:
- Financial accounting fulfills the function of providing the information that is needed for the economic management of the company and based on this, making known the status of the updated accounts and delivering the reports that are needed to keep the financial statements of the business.
- Administrative accounting interprets and collects the costs that are generated in the distribution, purchase or production and is for internal business use.
- Even depending on the size of the company it is possible that the accounting functions are distributed among several employees, but when it comes to small companies, the accounting is carried out by few employees who assume accounting responsibilities.
- Beyond the different types of accounting, all types play an important role because it is the main source of information for the business.
- By keeping the accounts of a company it is possible to know exactly what the debts are and what the value of each of them and their entirety is.
- It is also possible to know the magnitude of the company’s debtors and the amount of expenses generated by the business owner, therefore it is also possible to know the investments that are being made and the general expenses.
- It also fulfills the function of evaluating the cost of producing a product and estimating its sale price, therefore it reveals whether the company loses or makes money.
- With its function of making the balance sheet and the income statement, it is possible to know the current financial situation of the company.
- When accessing the financial results of the commercial activities of the business, it prepares and correctly establishes the financial statements.
- It generally performs functions related to bookkeeping, which maintains the general ledger and publishes the financial transactions that they carry out on a daily basis with the calculation of expenses, losses and profits.
- By taking charge of the bookkeeping, he maintains the bank records and makes the necessary deposits.
- Distributes, prepares and maintains the payroll of employee salaries.
- Bookkeeping is one of the functions of accounting but it also includes accounts receivable and accounts payable with payment corresponding to the organization’s expenses.
- Therefore, it controls the correct and punctual payment of the invoices issued, for which it contacts banks, clients and service providers.
- The professional and accountant of a small business is responsible for preparing the taxes gathering all the information you need with the documents that are requested to be presented.
- You create the financial reports, analyze them, and then you can suggest cost improvement and make decisions about spending and financial resources to help your organization grow.
The Importance of accounting in an organization
Businesses both large and small, public and private, for-profit and not-for-profit, are driven by numbers. Whether it’s tracking sales, managing inventory, or doing payroll, smart managers know that keeping an eye on those numbers is crucial, but without a strong accounting function, that task can turn into an organizational nightmare. Organizations looking for a complete accounting function need to consider various aspects of accounting beyond simple debits and credits.
What is the purpose of the accounting function?
The primary purpose of any accounting function is to keep ongoing financial records. Monetary information of all kinds – operating expenses, salaries, donations, capital expenditures, investments, cash flow, utilities – should be tracked monthly at a minimum. The ongoing result is the creation of an organization’s financial history that can be used in a variety of ways, providing managers with a snapshot of the company’s financial health and wealth at any given time.
The two main forms of accounting
But the data collected only makes sense if it is used; To use them properly, managers divide the accounting function into two main ways: managerial accounting and financial accounting. Although both are based on the same underlying financial data stream, their main difference lies in their focus and timing. With managerial accounting, the focus is internal and looking forward, but with financial accounting, the focus is external and looking back.
Management accounting
Business accounting is used internally to plan and move an organization financially sound. With this role, accountants observe the flow of historical financial data and the current economy and make assumptions about trends and what these trends mean for the future of the organization. Management accountants look at the organization in segments, be it by department, by region, or by product lines, for example, and estimates are made about sales expectations, performance, prices, costs, and labor needs. With managerial accounting, smart managers try to predict the financial future of an organization and make sound decisions based on those expectations.
Financial management
With financial accounting, the emphasis is on examining past data in order to determine the value of an organization as a whole. Shareholders and investors will use the information to decide whether a public company is undervalued and worth investing in or is overvalued, and should be avoided. Creditors will use this same information to decide if a nonprofit is a good risk before lending money. Government agencies will use this same information to collect taxes on for-profit organizations. Most importantly, however, financial accounting is necessary, and since it is shared externally, it must be accurate, so financial accounting must adhere to generally accepted accounting principles to avoid legal problems. However, managerial accounting, since it is used internally, does not need to be as precise, nor is it mandatory. Therefore, although organizations must inform the public of the accuracy of financial information, they are still free to do whatever they want for internal planning purposes.