Accounting
Candlefocus EditorAt the simplest level, bookkeepers can utilize a system of manual or computer-based processes to log income, expenses and other financial information. In larger businesses, though – particularly where outward-facing economic data needs to comply with regulations such as Generally Accepted Accounting Principles (GAAP) – a certified public accountant (CPA) should be brought in to ensure that the system is kept up-to-date and compliant.
That said, there are two particular types of accounting structures that help businesses make sound decisions. The first is managerial accounting, which is used to analyze and plan on a company-wide basis. This encompasses strategies such as budgeting, forecasting and financial performance analysis. Managerial accounting can also assist in developing strategies for long-term success, by making use of financial modeling and sensitivity analyses.
The second type of accounting is cost accounting. Here, the focus concentrates on the company’s cost structure, and, with the help of projections, methodologies such as activity-based costing or process costing, the cost of producing a certain good or service can be assessed. The focus is often on cost-cutting, efficiency and effectiveness of operations – an increased understanding of which can help business owners decide how much to charge for products, services and other offerings.
When taken together, managerial and cost accounting go hand-in-hand to help businesses understand their economic performance and plan for the future. Sound accounting practices should adhere to the GAAP; however, on top of this, the underlying principles of accounting, from internal control to preparatory financial statements should be kept in check to ensure that the company is maximizing their income and minimizing their expenses at all times.
In conclusion, accounting offers numerous benefits to businesses of all sizes, and should be taken seriously – regardless of industry or size. Engaging a certified professional accountant is essential if you are to obtain the most secure and accurate financial data, as well as staying compliant with regulations such as GAAP. Utilizing the two main forms of accounting, managerial and cost, businesses can also ensure that they are turning a healthy profit while also making sound decisions that will ensure their long-term viability and sustainability.