Dear Entrepreneurs and Leaders,
You see your business running successfully, but deep inside, something doesn’t feel quite right?
If you have this feeling, know that there’s likely an issue with your accounting processes, either directly or indirectly. When there’s a problem with accounting, it adds unnecessary workload to your business, meaning the labor resources you’re paying for are wasted. And that’s not even mentioning the knock-on effects of other losses.
What is accounting, and why is it necessary?
It’s your information system where data is recorded, classified, and gathered to enable sound decision-making for the successful growth of your business.
What types of accounting are used or should be used?
Often, an employee who understands one type of accounting views all other types through the same lens, leading to confusion. This is why accountants struggle to communicate with managers, tax officials misunderstand accountants, and everyone believes they are right. In fact, everyone is right; these issues arise simply because one person doesn’t understand the purpose of another type of accounting, causing conflicts.
Don’t worry—we’ll explain everything in simple terms, because organizing all types of accounting is what we do.
Let’s continue with accounting:
There are various stakeholders in a business’s information. "Stakeholders" refer to individuals and entities such as business owners, employees, partner companies, government bodies, and financial institutions. These stakeholders have different needs for business information, which is why three main types of accounting are used and should be used: Management Accounting, Financial Accounting, and Tax Accounting.
As you can see, the reason for different types of accounting stems from the question, "Who needs what?" While the operations and processes within the business remain unchanged, each type of accounting records the same transaction but tailors the data or approach differently depending on the user. The difference lies solely in the varying information demands of each user.
Financial Accounting
So, who needs financial accounting?
Business owners, banks, other companies, government agencies, and investors all need financial information to understand a business’s financial position, profitability, and solvency.
But how can external parties trust a business’s management accounting data or interpret and compare its unique measurements? It’s complicated.
This is where the need for a standardized approach arises. Concepts of financial accounting, as well as national and international standards, were developed. Eventually, financial accounting emerged as a field of study that measures the financial outcomes of organizations' activities based on theoretical and practical principles.
As you can see, while managers can set up management accounting as they wish, businesses must also establish financial accounting according to standardized frameworks to present their data to external parties in a way they can read and analyze.
Conclusion:
Financial accounting is essential for external parties. It’s a discipline that measures an organization’s financial status and performance based on theoretical principles, and it is conducted according to established standards.
Financial Accounting Setup (based on IFRS)
In the 1C software, accounting is set up in compliance with the International Financial Reporting Standards (IFRS) and tailored to the specific field of activity. This includes defining Accounting Policies, categorizing Revenue and Expense Centers, identifying business processes for daily transactions, classifying expense and payment items, counterparties, items, and other elements. Additionally, the setup involves the preparation of the Initial Financial Position (balance sheet) report, along with providing system guidance and training.
Financial Accounting Execution (based on IFRS)
In the 1C software, financial accounting is performed based on the daily and monthly financial transaction data provided by the business. The predefined reports are delivered to you and, upon your instruction, to third parties on the specified dates.
Financial Accounting Monitoring (based on IFRS)
In the 1C software, the daily and monthly transaction data of the business is recorded by its own accountant and staff. However, our chief accountant reviews the processed transactions for compliance with financial accounting standards, conducts a monthly review, identifies errors, and provides explanations with recommendations on how to address them.
Hurry up to benefit from our Financial Accounting services at CRYSTAL BUSINESS!!!