What is an Accountant and The Accounting Process?
Accounting is the language that businesses, government agencies, and other organisations use to communicate their financial information to the public and to their investors, employees, suppliers, and others with an interest in the organisation’s performance.
The word accountant is derived from the Latin term computer, meaning to count. With this definition in mind, it becomes clear that an accountant must possess basic mathematical skills because accounting involves manipulating numbers and using various math-based procedures to keep track of the money that comes into and goes out of the organisation’s coffers.
What is an accountant?
An accountant is a licensed professional who works with businesses to keep track of their finances. They can help you save time, money, and stress by making sure your records are organised.
Accounting processes are very complex. However, they are the lifeblood of any business, so it’s important that you understand the basics. The different types of accountants specialise in different aspects of the accounting process; some focus on just bookkeeping while others work with taxes or payroll.
Accountants have three main tasks:
- Collecting financial information from sources like invoices, bank statements, and credit card statements
- Making sense of the data and categorising it into reports like profit/loss statements or balance sheets
- Reporting this information to management
Others tasks may include:
- Preparing tax filings such as sales tax returns, withholding tax returns, corporate income tax returns, partnership returns, gift tax returns and personal income tax returns for the owners of small corporations
- Helping management make informed decisions about how best to use the company’s assets
- Balancing the books (making sure there is no more money coming in than going out)
- Tracking profits and losses over time to see if improvements need to be made – Calculating salaries, benefits and other compensation
- Setting up retirement plans like 401Ks and Roth IRAs
- Implementing budget policies
- Creating budgets
- Finding ways to increase revenue, decrease expenses, or both
- Doing cost analyses and forecasting future cash flow needs
- Preparing annual financial statements
- Compiling these figures into quarterly and annual reports
- Assisting with day-to-day business operations
- Preparing for emergencies
- Taking care of necessary paperwork
Types Of Transactions an Accountant May Be Involved With
An accountant can become involved in a wide range of different types of transactions, from balancing the books to ensuring that taxes are paid. When a company has more than one type of transaction, an accountant may be responsible for preparing one or more of the following:
Balance sheets (which detail assets, liabilities, equity, and capital); income statements (which provide profit or loss for the period); cash flow statements (which show how cash inflows and outflows affect business); and other financial reports.
In addition to preparing financial reports, an accountant can also be involved in ensuring that taxes are paid on time. For example, in the United States, if companies have a gross annual sales volume of over $1 million USD, they are required by law to file their quarterly sales tax return with their state’s Department of Revenue.
The Internal Revenue Service (IRS) may also require quarterly returns if it suspects unreported activity or abuse of exemptions. Taxes must be filed even if they have not yet been collected by the government because they represent funds owed at the end of each year.
Furthermore, many states issue Sales Tax IDs and permits to collect this revenue. These licenses often charge fees which vary depending on the type of license requested. The IRS requires strict compliance with federal tax laws and audits every quarter as part of a Quality Assurance Program designed to ensure accurate reporting while maximising taxpayer compliance rates.
While these requirements exist primarily for large corporations, smaller firms may be subject to IRS requirements as well.
The Different Types of Accounting
When it comes to accounting, there are two different types of accountants: external and internal. External accountants are required by law to maintain strict confidentiality with the information they provide clients, whereas internal accountancies work within a company or organisation.
Accounting processes come in many shapes and sizes depending on the type of business you have. However, every company needs to track its finances in order to stay afloat. Typically, each company has at least one person designated as the bookkeeper who handles this task. A bookkeeper can be anyone from an office manager to a warehouse worker.
The most common form of accounting for businesses that have retail stores is called double-entry bookkeeping. In essence, every transaction will involve two accounts being debited (money being taken) and credited (money being given).
An example would be when a customer buys something at your store. Debiting the customer account would result in crediting the merchandise account. Likewise, crediting the customer account would result in debiting the merchandise account. These two steps are necessary so that all transactions balance out over time.
The Responsibilities of An Accountant
An accountant’s responsibilities are diverse. They may do payroll, prepare financial statements, advise on tax law, or help clients manage their finances. Depending on the size of the firm they work for, they may specialise in one or more of these fields.
Generally speaking, though, their job boils down to four things : analysing information to produce reports, preparing taxes, managing financial records, and advising clients on managing their money.
The Skills Necessary to Be a Successful Accountant
Accounting skills are necessary to be a successful accountant. There are many different types of accountants, but they all need strong math skills, good communication skills, and excellent organisation skills.
If you want to be a CPA in the United States, you’ll also need at least 150 hours of college credit in accounting. The first step in the accounting process is recording transactions – this includes debits and credits. Next comes reporting financial information to others so that they can make decisions about investments or loans.
The Importance of Ethics in Accounting
Accountants are a crucial part of any organisation. They provide insight into your company’s financial health, help you determine your best course of action to take, and advise you on the best ways to reach your goals.
However, many people forget that accountants have ethical responsibility as well- not just for their clients but for society as a whole. That’s why it’s so important to work with someone who has both the skill set and high levels of integrity needed to do this job.
A good way to find one is by asking them questions like:
- How do you handle confidentiality?
- How would you define professional ethics?
- How do you approach decision making?
What Is The Accounting Process
An accounting process can be broken down into four different stages:
- Capturing information,
- Recording the information,
- Analysing the information, and
- Interpreting and presenting the data.
In order to capture information, it’s important to know who your customers are. Accountants use many different sources of financial data including bank statements, tax returns, invoices, payroll records, etc. This will help them identify how much money they owe in taxes or how much they need to pay out in salaries.
The next stage of the accounting process is recording the information. For example, every time someone pays for something with cash, an accountant will record that transaction in their books so that they can keep track of how much money they have left to spend or save.
Areas of Accounting Specialisation
Accounting experts are professionals who specialise in keeping records and organising information to prepare reports that are used by other people to make decisions about the business. The four main areas of specialisation are general, public, corporate, and forensic accounting.
General accountants work with a variety of clients including small businesses and individuals. Public accountants often specialise in providing audit services to non-profit organisations.
Corporate accountants help companies manage their financial operations, such as taxes or payrolls, while forensic accountants work with legal teams when they’re investigating fraud cases. Some accountants start off at small firms and work their way up to larger ones; others start out working for themselves. Aspiring accountants can get training through a bachelor’s degree program in accounting, which typically takes three years to complete.
It’s not enough that you have a solid understanding of accounting principles. In order to be eligible for certain jobs, like public accountant or auditor, you may need an accounting certification. That’s why it’s important for students pursuing a career in accounting to find schools that offer accredited programs with both theoretical instruction and hands-on experience.
Aspiring accountants should also look into which certificate is most relevant to their goals, such as Certified Management Accountant (CMA), Certified General Auditor (CGA), or Certified Public Accountant (CPA).
The Different Types of Accounting Certifications
Choosing an accountant is a decision that should not be taken lightly. There are many different types of accounting certifications, each with its own degree of credibility. The most common types include: Certified Public Accountant (CPA), Chartered Professional Accountants (CPA), Chartered Certified Accountant (ACA) and Certified Management Accountant (CMA).
- A certified public accountant provides comprehensive business advisory services for tax, audit and advisory needs.
- A chartered professional accountant typically specialises in one area such as taxation or auditing and can work in various industries including government, healthcare or manufacturing.
- Chartered certified accountants typically work for large organisations such as banks, universities or other public entities.
- Certified management accountants typically work for companies to provide them with financial information about their operations. CMA’s often make up part of a company’s executive team and may also handle corporate-level strategy.
The Benefits of Getting an Accounting Certification
Getting an accounting certification is beneficial for a number of reasons. First, it shows potential employers that you are knowledgeable in accounting practices, which is important for many positions. Second, it will help you stay up-to-date on new changes in the field. Third, if you decide to open your own business down the line, it is helpful to have an accounting background.
How to Choose the Right Accounting Certification
When choosing an accounting certification, it’s important to find one that aligns with your current level of expertise. If you don’t have any accounting knowledge at all, there are a number of options that offer introductory courses on general principles.
For those who have some accounting experience but want to take their skillset to the next level, there are a number of more advanced certifications available. The CPA exam is well-known as being one of the toughest in the industry and will make candidates experts in everything from taxes to auditing. The ACA is another popular option for accountants looking for a broad range of knowledge and skills.
Those who need specialised knowledge can explore certifications like Certified Financial Planner (CFP), Chartered Alternative Investment Analyst (CAIA), or Certified Public Accountant (CPA).