At accounting.co, we aim to help you find the right accounting option for your business. By providing you with a wide range of both accounting firms and accounting software packages, you can compare the options side by side, evaluating features and costs to find the option that will best suit your business.
Whether you’re looking to engage the services of an accounting firm in your area, or you want to invest in online accounting software or desktop accounting software, we make it easy for you to assess the various accounting options on offer.
Unsure which option is right for you? After searching accountancy services near you, you can check out our easy-to-use rating system to get an idea of what you could expect from each firm. The same applies for accounting software. If you’re not sure which accounting software package will work for you, you can find in-depth info in our handy reviews. It really couldn’t be easier.
What is accounting?
Quite simply, accounting is the process of recording financial information in a useful way, to then store, sort, retrieve, summarise and present that information in various analyses and reports.
Businesses big and small use accounting to keep their financial information organised. This allows them to make sense of their financial data, to then make projections to help their business grow and succeed. Accounting also helps businesses stay compliant of financial regulations.
Today, much of the process of accounting has been simplified by advances in computer technology. The recording, storing and sorting aspects of accounting have been automated, allowing small and medium-sized businesses to deal with their own accounts day-to-day.
By using accounting software, such as desktop accounting software and online accounting software, businesses can keep track of their financial data. While accounting professionals may still be required come tax time, accounting software makes everyday book-keeping and accounting simpler, faster and much less stressful.
Components of Accounting
Accounting, in its most simplified form, is made up of two parts: book-keeping and analysis. Book-keeping – also known as financial accounting – is the process of recording and summarising financial information. This involves recording transactions, such as sales, purchases and expenses, to then summarise the information and present it.
The information could be presented in the form of financial statements, which show the overall health of the business. By organising financial data, book-keeping facilitates the effective management of the business by delivering important information.
This could include how much each customer owes the business, how much the business owes to suppliers, lenders, employees and the ATO, how profitable the business is, and how much capital is invested by the owners in the business.
With this information properly recorded, summarised and presented, it can then be analysed. This analysis is what forms the basis of management accounting.
Also known as managerial accounting, management accounting is the process of analysing the information provided, to allow management to make decisions pertaining to the organisation and control of the business. This could relate to investment decisions, budgeting and performance measurement.
What does an accountant do? If you were to look at the tasks completed by an accounting department within a business, they would look something like this.
Recordation: The recording of repetitive or recurring business transactions can involve issuing customer invoices, paying supplier invoices, recording cash receipts from customers, and paying employees. These tasks would be handled by the billing clerk, payables clerk, cashier, and payroll clerk, respectively. Meanwhile, non-repetitive tasks requiring the use of journal entries would usually be completed by the fixed asset accountant, general ledger clerk, and tax accountant.
Classification: Following on from this, the accumulated accounting records are summarised in the general ledger. This consists of a number of accounts, detailing particular types of transactions, such as product sales, depreciation expense, accounts receivable, debt, and more. A subledger may be used to store certain high-volume transactions, such as customer billings. The information held within these ledgers is used to create financial statements and internal management reports.
Reporting: As the reporting aspects of accountancy are sizeable, they are typically divided into smaller areas of specialisation.
- Working within the area of financial accounting, the general ledger accountant, controller, and chief financial officer, are in charge of the accumulation of business transactions into financial statements. Presented based on sets of rules known as accounting frameworks, these documents utilise Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).
- Working within the management accounting space is the cost accountant and financial analyst, who investigate ways to improve the profitability of a business and present their results to management. This type of accounting is not ruled by any particular accounting framework. Instead, reports created are personalised to the needs of the business.
Recording: As mentioned previously, the process of recording transactions in accounting is referred to as book-keeping. When recording information, accountants maintain a set of books. Utilising methodical procedures in recording this data, this task has now more or less been taken over computer systems.
Summarising: Raw data created by the recording of transactions is of little use to a business, so it must be classified into categories and summarised.
Reporting: The summarised data can be used to create reports, which illustrate how well the business is performing. Reporting is usually done in the form of financial statements, which may be provided to investors on a quarterly and annual basis. These financial statements are regulated by government bodies to safeguard against misleading financial reporting.
Analysing: After data has been recorded, summarised and reported, it must be analysed. Analysing the results of this data allows meaningful conclusions to be drawn, looking at the positives and negatives, and making comparisons. This may mean comparing profits, cash, sales and assets, in order to analyse the performance of the business.
Types of Accounting
There are various different types of accountancy, each working within its own specialisation. Aside from financial accounting and management accounting, which have already been discussed, here are some of the other types of accountancy.
- Public accounting: Examining financial statements and supporting accounting systems of clients, those who work in public accountancy make sure the financial statements created by clients fairly present their financial results and position.
- Government accounting: Utilising a unique accounting framework, those who work in government accountancy create and manage funds, from which cash is disbursed to pay for a number of expenditures related to the provision of services by a government entity.
- Forensic accounting: Working to reconstruct financial information when a complete set of financial records is not available, forensic accountancy can be used in instances such as the reconstruction of the records of a destroyed business, the reconstruction of fraudulent records, or the conversion of cash-basis accounting records to accrual basis.
- Tax accounting: Those who work in tax accountancy focus on compliance with tax regulations, tax filings, and tax planning to reduce a company's tax burden in the future.
- Internal auditing: Examining a company's systems and transactions, internal auditing is designed to spot control weaknesses, fraud, waste, and mismanagement, to then report these findings to management.
Why is accounting important?
So, why is accounting so important? Often described as the backbone of a business, accounting holds many roles, even in the smallest of businesses.
One of the most important of those roles involves recording financial data. Businesses need to have a reliable and methodical way of recording financial information. Without it, suppliers would not be reimbursed, employees would not be paid, customers would not be invoiced, and the entire business would falter and stop.
Another important aspect of accounting involves determining businesses’ legal financial rights and obligations. Proper accounting ensures businesses abide by the law, for example, paying the correct amount of tax, and calculating the amount each supplier needs to be paid with the regards to the cost of purchase, sales tax, discounts, duties, refunds and withholding tax.
Accounting also allows businesses to assess performance. Summarising financial data to create financial statements, accountancy provides an overview of the financial activities during a certain period. This can help the business measure and evaluate by making comparisons, which can offer guidance in investment decisions and where to go to next.
By helping businesses plan their finances by developing budgets and forecasts, accounting can also assist in planning and control. Using variance analysis, the business can monitor expenses incurred against budgeted expenditure, to then help plan their finances ahead and control any deviations from the budget.
Accounting can also provide a basis for management to make certain decisions, such as investment appraisal, make or buy decisions, pricing decisions, and limiting factors analysis.
What’s the right type of accounting for your business?
Businesses and their needs are unique. So, it’s up to you, as the business owner to work out the types of accounting your business needs. Whether it’s payroll accounting or cash flow accounting, producing balance sheets and operational reports, or tracking income and expenditure, you have to ensure you have the skills and know-how on your side so that your business runs smoothly.
You may choose to do your accounting in-house or hire an outside professional to help with the process. Or you may opt for a hybrid approach, utilising the skills of internal personnel to complete tasks such as basic book-keeping, to then engage the services of an external accountant to complete annual taxes.
Want to know what type of accountancy options are available to your business? Simply search accountancy firms in your area using accounting.co. Here you can find out what’s available to you, and what type of services are on offer. You can match your needs with the accounting options available, with just a few clicks of the trackpad. We do the hard work, so you don’t have to.
Accounting Software Options
What about accounting software? Designed to make the accounting process as simple as possible, accounting software offers two main options. With online accounting software, you can easily sync your accounting system with your bank accounts, making it super easy to enter transactions simply by finding them in your bank feeds and then clicking the right buttons.
Reducing the possibility of missing an expenditure, online accounting software also allows you to access your accounting program from any computer, laptop or device. However, you may find online accounting programs can be slower than desktop versions at processing each transaction, making the overall process slower and more cumbersome.
If you opt for desktop accounting software, you may find several advantages over the online alternative. Firstly, investing in desktop accounting software usually involves a one-off purchase, while online accounting software may require an ongoing monthly fee. There’s also the fact that when using a desktop program, all your information is always available, no internet connection required.
Some users may prefer the security aspect of desktop accounting software, as their information is held on one desktop, rather than in the cloud. Desktop systems also tend to be simpler to use, which can make it easier to locate and identify errors and inconsistencies, while also offering better adaptability to each business’s individual needs.
With that being said, there are new programs – both online and desktop – coming on the market all the time. The key to choosing the right accounting software for your business is knowing what’s available and how it could potentially work for you.
Which is where we come in. At accounting.co, you can find and compare a wide range of accounting software options, so you know what’s on offer and whether it would work well for your business. Want reviews? We’ve got them too. When it comes to accounting software options, we’ve got you covered.