Business Accounting

Non Profit Financial Accounting

Non Profit Organizations require as much attention in the Financial Accounting practice, as do other organizations. Financial Statements at the end of the financial year must be generated, in order to be presented to Sponsors and Tax Authorities. These Financial Statements are derived out of Accounts Ledgers which need to be maintained on a daily bases, following common principles of Financial Accounting.

Some of the Financial Accounting practices for a Non Profit organization, which must be formally followed throughout the year, are Designing a Budget, Managing Cash Flow, Accounts Bookkeeping, Budget Deviation Analyses, Financial Analyses, Financial Audits and Preparing Financial Statements. A Fiscal Sponsor or another Non Profit organization may be pursued for assistance in Finances and Taxes. An active Board Treasurer, who also has Financial Accounting expertise, must be appointed to oversee financial matters and ensure that the Financial Accounting process is committed in a precise and timely manner. A software package must be identified to automate the Financial Accounting process of bookkeeping, financial analyses and generating of financial statements.

Managing Cash Flow is critical and the records need to be accurate in order for the Statement of Cash Flow to tally at the financial year end. Cash Flow must be forecasted well in advance, projected annually and must be resolved periodically with the bank account. Budget Deviation analyses must be performed in order to track expenses and income. Program Finances, i.e. Indirect Costs and Direct Costs, must be managed well and checked periodically in order to ensure that the costs committed are within the approved Program Grant.

Financial Statements such as the Balance Sheet, Income Statement and Statement of Cash Flow must be prepared at the end of the financial year. The Balance Sheet maintains a record of Assets, Liabilities and in summary states the net worth of the Non Profit Organization. The Income Statement summarizes information such as revenue, expenses, profits and losses, along with details that support them. Financial Analyses on Financial Accounting Information explains in detail about the progress of the Non Profit organization.

Filed Under: Business Accounting Tagged With: Cash Flow, Finance, Financial statement, Non Profit Organization

Financial Accounting and Management / Cost Accounting

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Financial Accounting is the process of financial assessment of the Business, and presentation of Financial Statements to Creditors, Investors, Tax authorities and other Governmental authorities. Management Accounting or Cost Accounting on the other hand, does follows basic principles of assessment and calculations of Financial Accounting, but does not follow the GAAP or any other Standard in formation of formal statements and reports. The need for Management Accounting Reports was first felt and introduced during the Industrial Revolution in the 19th century. Financial Accounting Standards followed later with the growth of the economy.

The Leadership and Management of the organization, however do rely on Financial Accounting Statements and Reports generated by Financial Accountants, their need for detailed Management Accounting Reports proves critical as well. They need Management Accounting Reports for various purposes, including assessing performance of the different divisions and departments, capital utilization, orders received and pending, sales for periods, trends of market behavior, workforce productivity and utilization and more intricate information pertaining to business operations. Special Management Reports are extensively used when investigating business opportunities in the market for growth and expansion. Apart from those mentioned above, there are more Management Reports created to cater to specific needs. While the Four Financial Accounting Statements are prepared to act as summarized legal declarations to outsiders, Management Accounting Statements and Reports can run into a large number with overwhelming information and is used internally within the organization. Management Statements and Reports, do not follow Standards specified by authorized bodies, but is designed and presented according to the needs and styles of the Leadership and the Management.

Management Professionals seeking to extend their expertise in Management Accounting and Cost Accounting can pursue certification for Certified Management Accountant (CMA) at the Institute of Management Accountants. To achieve this certification, Professionals must apply and register with the Institute and maintain a requisite of two year work experience as a Management Accountant or as a Financial Accountant. Candidates must pass the four part CMA examinations within a three year period from commencement of the certification program.

Filed Under: Business Accounting Tagged With: Business, Cost accounting, Financial statement, Institute of Management Accountants

Financial Accounting – The Four Financial Statements

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Financial Accounting practiced throughout the United States according to the GAAP standard, requires Four Financial Statements to be produced periodically. The Four Financial Statements are the Balance Sheet, the Income Statement, Statement of Cash Flow and the Statement of Owner’s Equity. These Four Statements are derived out of the long cumbersome Financial Accounting process, beginning with preparing Accounting Ledgers and imposing complex calculations and methods upon the data. These Four Statements of Financial Accounting speak clearly, in summary, of the Business’s financial capability and prowess to stay Profitable and Solvent.

The Balance Sheet contains information about the organization’s Assets, Liabilities and Equity. Assets are of Current Assets such as Cash, Securities, Accounts Receivable, Insurance, Inventory, and Fixed Assets such as property and equipment. Liabilities include Short Term Liabilities such as Interest, Accounts Payable, Wages, Taxes, and Long Term Liabilities such as mortgages and bonds. However, Payables which are due in 12 months fall under Short Term Liabilities, while Payables due beyond 12 months are considered Long Term Liabilities. Equity refers to the value of the Business owned after Creditors have been paid. Separate Equity information applies to Owner and Stockholder.

The Income Statement explains Profitability of the Business, in terms of Income and Expenses of Products and Services. The Income Statement indicates Expenses, Revenue and summarized information of Net Income calculated by deducting Expenses from Revenue. The Statement of Cash Flow describes Accounts Payables and Receivables as on the date the Financial Statement is released. Information such as Cash Proceedings, Changes in Cash Balance and Cash Sources are indicated clearly. These Cash analyses are categorized into Operating Cash Information, Investment Cash Information and Financing Cash Information. The Statement of Cash Flow is constructed based on the beginning and ending Balances in the other Statements.

The Statement of Owner’s Equity discloses the Income retained by the organization, after all Payables have been deducted. Equity information is greatly influenced by Income and Dividends. Summarized Equity information also appears in the Balance Sheet. Details about Stock, pertaining to stockholders, are recorded in this Statement.

Filed Under: Business Accounting Tagged With: Accounts receivable, Balance sheet, Cash Flow

Financial Accounting Standards

Financial Accounting though processes Accounting Information using fundamental principles and techniques, interpretation of Financial Information and the Financial Statements can differ among different approved and recognized standards. In the United States, the Generally Accepted Accounting Principles (GAAP) is preferred and used by Businesses throughout. As it goes with the US, most Businesses having international presence follow the GAAP standard.

The practice of Financial Accounting follows fundamental principles and approaches in processing Accounting Information. The Information is first captured and stored in Accounting Ledgers using the Single Entry Method or the Double Entry Method. These Accounting Ledgers are universally same across all standards of Financial Accounting and is based on the same principle. These Accounting Ledgers become the bases of all future references by the Financial Accountant, in order to further process them into a meaningful and summarized perspective. The methods of calculation and formulae remain unchanged across Financial Accounting Standards, and remain universal and known to all Financial Accountants. However after the Financial Information is processed, different Financial Accounting Standards put them into different Statements and Reports and present them according to the specifications of the Standard. Since majority of decision makers, such as the Leadership, Creditors, Investors, Shareholders and Tax authorities, review and make decisions based on the summarized Financial Statements, it is imperative that universal comprehension in Financial Statements across Businesses is maintained. Consistency in preparing Financial Statements over the years helps a great deal in connecting historical Financial Information and detecting trends.

Some of the authorized reviewers and approving authorities of Financial Accounting Standards are Securities Exchange Commission (SEC), Accounting Principles Board (APB), Committee on Accounting Procedure (CAP), Financial Accounting Standard Board (FASB), Governmental Accounting Standards Board (GASB) and the International Accounting Standards Committee (IASC). In the United States, the FASB is the primary organization which defines the largely prevalent GAAP Financial Accounting standard. The SEC retains the authority to establish Financial Accounting Standards for Publicly Traded companies. The GASB is a special organization which defines Financial Accounting Standards for Local and State Governments.

Filed Under: Business Accounting Tagged With: Accounting, Financial Accounting Standard Board, Financial statement, United States

Financial Accounting -The Detailed Process

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Financial Accounting is a formal process of assessing the financial status and capability of the Business and raise up Financial Statements in support. These Financial Statements are considered Legal and shared with Creditors, Investors and Tax Authorities. The process of financial assessment and statements also prove useful to the Leadership of the Organization for visionary and operational purposes. A thorough and detailed Financial Accounting process helps the organization to save huge sums of money by evading unnecessary taxes and payments to tax authorities and other local and state authorities.

Financial Statements and Reports are prepared and presented according to Generally Accepted Accounting Principles (GAAP), in order to maintain universality and consistency. The Financial Accounting approach in Individuals and Small Businesses is generally known as the Cash Method, which differs from the Accrual Method used in Large Businesses and Corporate organizations. In the Cash Method, Financial Accounting follows proper cash transactions, without assumptions, in order to deem the transaction complete and the Expense or Revenue associated with it. The Accrual Method makes assumptions and considers virtual transactions as complete, even though the actual cash flow happens later. To overcome logical difficulties in simulating some financial circumstances, Financial Accounting makes use of Assumptions, Principles and Modifying Conventions.

The Financial Accountant detects Accounting Information among the galore of receipts, bills, emails and documents that float in the Business. These transactions are captured and entered into Accounts Ledgers, using either the Single Entry system or the Double Entry system. These Accounting Ledgers now contain comprehensible Financial Accounting Information and become the basis of all future reference for the Financial Accountant. This information is then processed with complex calculations and techniques to eventually give rise to the desired financial perspective of the Business. When producing Financial Statements, Financial Accounting aims at disclosing two facts about the Business, i.e. Profitability and Solvency. Financial Accounting produces four final Financial Statements, known as the Balance Sheet, Income Statement, Statement of Owner’s Equity and Statement of Cash Flow. These Financial Statements summarize Assets, Liabilities, Expenses, Income and Equities of the Business.

Filed Under: Business Accounting Tagged With: Accountancy, Accounting, Business, Financial statement

Financial Accounting and Health Insurance

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With the growing Economy, Technology burst and the invention of Health Insurance, Citizens plan comprehensive Healthcare for themselves and their loved ones. Statutory laws have been updated to include Insurance laws to facilitate the best interest of individuals and Insurance companies. Forced Healthcare expenses caused by unexpected illnesses and accidents, which would otherwise run into tens and hundreds of thousands of dollars, is now covered by Insurance companies at the cost of a yearly Premium.

Imagine Health Insurance companies dedicated to provide Healthcare to millions of citizens and the enormous calculations and formulations of Premium and Disbursement amounts of money involved, and it then becomes easy to understand that Financial Accounting forms the core of this Industry. Financial Accountants commit much research and calculations in arriving at proper figures to form policies of different types, which must prove suitable for different individuals. Financial Accounting in Health Insurance involves advanced computations, approaches, techniques and maneuvers in order to ensure that the Insured will benefit most from low Premium and good Coverage as well as so that the Health Insurance Company optimizes its costs. Individuals are prone to illnesses and accidents, depending on their ages and their professional environments. Financial Accountants use various formulae to arrive at affordable Premiums for the Insured, based on the above factors as well as on their income. Individuals, who would like to extend their Health Insurance to their family, will require the Financial Accountant to calculate discounted Premiums.

Students and Companies generally attract Health Insurance companies charging lower Premiums. Health Insurance Premiums vary from person to person according to their medical history. Some Individuals increase Health Insurance coverage for specific illnesses, while others opt out of some. Frequent flyers and those traveling internationally, require special coverage. These variations in Premiums mean that Financial Accountants are constantly at work in order to ensure that the flow of money is appropriately balanced between the Insurer and the Insured. The Financial Accounting practice also form an important part of States and Federal government, when statistics of Health Insurance is being assessed and reviewed.

Filed Under: Business Accounting Tagged With: Business, Financial Accountant, Financial Services, Insurance

Financial Accounting and Auto Insurance

The nation today is experiencing an exponential burst of vehicular leverage and the resulting road traffic. Road accidents are common and sometimes sustain injuries to both the vehicle and the travelers inside it. Reparation and restoration of the vehicles damaged and medical expenses of individuals injured, cost an overwhelming sum of money. Auto Insurance and Financial Accounting provide a universal solution, making it affordable for everyone to own a vehicle and be carefree of worry about expenses involved, in case of an accident.

Auto Insurance financially covers every vehicle, by charging vehicle owners a premium sum of money upfront every year. Since this process is universal and happens at a mass level, Financial Accountants calculate Premiums taking into account many factors, which influence a reduction or increase in the amount. Calculations involved are usually complex and use advanced mathematics and Financial Accounting approaches, in order to arrive at the reasonable sum. Insurance claims for accidental damages though seem to take a bureaucratic approach in the beginning, but when they do get approved by the Auto Insurance company, will be taken forward for processing by Auto Insurance Financial Accountants. This process involves complex calculations and is critical since it will determine the amount of money, which is usually a high sum, to be remitted to the claimant. Every claim that is approved by Auto Insurance companies will have some future financial implication to both the company as well as to the Insured. Financial Accountants apply various formulae for different situations and types of claims, in order to increase the next premium and also accelerate the depreciation value of the vehicle.

With every New Year, the Auto Insurance Financial Accountant imperatively calculates and effects Depreciation for each vehicle, which then through further calculations, determines the new yearly Premium amount. Apart from these fundamental Financial Accounting practices, the Financial Accountant uses his Financial Accounting expertise in developing company specific Auto Insurance policies. Financial Accountants also work for States and the Federal government in assimilating various statistics, and provide Leadership with Financial Reports and advice for critical decisions.

Filed Under: Business Accounting Tagged With: Auto Insurance Financial Accountant, Financial Accountant, Financial Services, Insurance

Fields of Financial Accounting

Financial Accounting is a mainstream profession, to do with organizing and processing Financial Information of Individuals and Organizations, and raising Financial Statements and committing Legal procedures which prove to hold of lawfully genuine value for formal transactions and in the court of law. Though the activities and procedures of Financial Accounting are same across all fields of the profession, Financial Statements produced by the Financial Accountant and his Procedural Objectives differ greatly depending on the type of Individual or Organization, he is representing.

Financial Accounting is most leveraged for its primary purpose of assessing the Individual or the Organization’s financial value, producing Financial Statements and committing Audit Tasks. Individuals, Associations, Web Services, Small Businesses, Public Companies, Multi National companies, Governmental Institutions and other Regulatory Bodies work closely with Financial Accountants during the Financial Accounting process. Financial Accounting is the only authorized way to evaluate Payroll transactions and process Taxation for the Internal Revenue Services (IRS) and for other Governmental and Regulatory Bodies. Financial Accounting follows general principles in processing all Payroll Services, Retirement Plans, and other Financial Benefits of the Employee, with the universal objective of Taxation and Compliance, required by Statutory Law.

Organizations, both domestic and International rely greatly on Financial Accounting principles and methods in structuring Finance and Investing opportunities, through Equities and Options and systematize the procedures involved in Domestic and International Investment. These processes and information, gives the Securities Exchange Commission (SEC) good control and review of money flowing in and out of the country, and across the globe.

Financial Accounting has evolved into specialized fields of practice in matters of the court of law, such as in Adoptions, Marriage and Divorces, Bankruptcy, Aliens, Fringe Benefits, Gift and Estates, Medicals, Reforms, Rentals, Scholarships, Social Security, Travels, Treaties and many more. With the constant booming of the Information Technology Era, Financial Accountants are consulted with and engaged in producing Financial Accounting Information Systems. Choosing and operating on a good Financial Accounting Software has today become a necessity for Financial Accountants worldwide, in order to save time and effort.

Filed Under: Business Accounting Tagged With: Accounting, Financial Accountant, Financial statement, Internal Revenue Service, Law, Small business, US Securities and Exchanges Commission

Financial Accounting and Life Insurance

Life Insurance is known to be a very famed transaction, which almost every person having dependants buy in order to ensure financial protection for their dependants, in event of death. Like all Insurances, Life Insurance is maintained by paying a Premium sum of contribution by the Insured every year. In case of death of the Insured or premature surrender of the Life Insurance, a profitable sum along with Interest is returned to the beneficiary or to the Insured.

Financial Accounting is at the core functioning of Life Insurance companies at every stage and period of the Insurance as it matures. The settlement of Life Insurance has very complicated implications to taxation. Much of the terms and conditions of the Life Insurance, though is defined at the time of buying it, situations of settlement can vary from case to case. Financial Accountants use complex calculations and formulae to define all possible settlement situations, and this must be done keeping in mind statutory laws and prevalent practices across the industry. As the Life Insurance settlement sum is huge, Taxation implications can be great as well. While some settlement situations favor tax benefits greatly, others due to unfavorable factors fail to save taxes. Because Life Insurance settlements are continuously happening among the population, Financial Accounting in Life Insurance companies is a perpetual process.

Some Life Insurance companies offer Life Insurance policies integrated with Mutual Funds. Financial Accountants perpetually watch the Stock Market and perform complex calculations. Calculating Mutual Fund Dividends everyday is again a daunting task for the Financial Accountant, for which a structured and systematic Financial Accounting program must be formulated and be in operation. Mutual Funds Dividends are sometimes disbursed periodically to some customers, while other customers choose to reinvest the amount, until the end of the next cycle. The Financial Accounting process which handles all these computations must be robust and be under constant surveillance by Financial Accountants. Financial Accounting is responsible for optimizing the benefits of the money at stake, both to the Insured and the Insurer.

Filed Under: Business Accounting Tagged With: Financial Accountant, Financial Services, Insurance, Life Insurance

Corporate Accounting

A brief look at corporate accounting helps to show the important role it plays in modern business.

Corporate accounting differs from general accounting, because basically in the corporate accounting office everything is put together and rolled into one big set of accounts reports and statements. Because of this, the corporate accountant relies heavily on divisional and regional accounting branches for accurate information. In effect, corporate accounting oversees all other accounting divisions.

When consolidating the financial statements and ledger accounts from all other departments, many different factors need to be taken into effect. Each division must be measured as far as percentage of contribution and also percentage of liability to the overall statements of corporate account.

Corporate Wide Audit

This is ultimately the responsibility for the corporate accountant, to prepare the company for its annual corporate wide audit. The corporate accountant is in charge of the preparatory process, and also overseeing the actual audit, answering questions from the audit team and providing any requested information, necessary for the completion of the audit.

The Annual Budget

Another responsibility of the corporate accountant is for helping the management team with the annual budget. Individual contributions and budgets are gathered from subsidiary divisions and departments, before being incorporated to make an overall corporate budget. When approved, it is the responsibility of the corporate accountant and his team to make sure that this information travels to the necessary departments and subsidiaries.

Analysis

Analysis of the accounts also falls onto the broad shoulders of the corporate accountant.
The management of the company rely heavily on the corporate accountant to determine whether the company has sufficient resources to meet its requirements, and move forward into the future.

Rewards

The average pay for a corporate accountant is $67,000, although many corporate accountants are known to earn much more than that amount. With stricter auditing and accounting regulations being expected in the next decade, the employment horizon looks pretty rosy for any accountants or auditors of the future, especially those with a CPA.

Filed Under: Business Accounting