The main objective of an Accounting Function is to record ongoing and operational transactions of any business. Any business, large or small, profit or non-profit is driven by financial information. This financial information comes in many forms, such as financial expenses, salaries, operational costs, operational cash flows, investments etc. All this recording of data creates information regarding the financial history of a business. This data is used to inspect the economic health and wellbeing of a company.
Many functions play a significant role in the proper working of a company; the main accounting functions are listed below;
- Financial Accounting
- Managerial Accounting
- Taxation Accounting
- Cost Accounting
The way above functions impact a company are discussed below,
1. Financial Accounting:
A set of established accounting principles are utilised in preparing the financial statements of a company. Financial Accounting Services involve recording, summarising and reporting transactions. Such recorded transactions are used to prepare financial statements, including Income Statements, Cash Flow Statements and Balance Sheets of a company that records its operating performance.
The statements used in financial accounting represent the five main classifications of financial data; Revenue and Expenditure, Assets and Liabilities and Equity.
The revenue and expenditures of a company are reported in the Income statement, whereas assets, liabilities and equity are reported in the Balance sheet.
2. Managerial Accounting:
Managerial or Management Accounting is a branch of accounting concerned with the Identification, Measurement, Analysis and Interpretation of financial information to make proper management and operational decisions.
Unlike financial accounting, which is primarily concerned with recording and reporting financial information, management accounting deals with internal reporting and aids in decision making.
Managerial Accounting analyses various events and operational activities to translate data into useful information that the company's management can leverage for making proper decisions.
The management relies on a few techniques like Margin Analysis, Constraint Analysis, Capital Budgeting, Cash flow and Forecasting services etc., to have better decision making.
Together with these techniques, management can predict and forecast favourable operations to increase revenue.
3) Taxation Accounting:
Taxation Accounting refers to methods and policies for the preparation of tax returns and tax compliance. It focuses on tax returns and payments rather than the preparation of financial statements.
You should submit financial statements in the UAE depending on your business's nature and whether you are VAT registered. More information needs to be analysed from a business perspective as a part of the tax accounting process.
The accounting standards practised in the UAE are based on the International Financial Reporting Standards (IFRS). To diversify the UAE economy with the global economy, the Federal Tax Authority (FTA) introduced Tax Accounting to expand business reach and capture global markets.
Tax compliance and preparation is a complicated process; it consumes a lot of time, and you need to stay updated with the new tax laws relevant to your business. Tax Accounting helps the management to stay ahead of such due dates and comply with new regulations.
Cost Accounting is a globally accepted accounting principle that insists on recording, summarising, and interpreting its cost on any process, service, product or anything else in an organisation.
Cost Accounting helps an organisation in cost-control and strategic planning, and decision making to become more cost-efficient. These financial statements and ledgers give the management insight into their cost segregation and information. Management gets the idea to control the cost and where measures are supposed to be taken for more cost efficiency, forming a better vision and plan.
It deals with the cost of every job, process, unit, order or service, wherever applicable, and includes the Cost of Production (COP), Cost of Selling(COS) and Cost of Distribution(COD).
Impact of Cost Accounting
- Measuring and Improving Efficiency
- Fixing Prices
- Identification of Non-Profit Activities
- Control over Stock
- Aids Future Planning
Cost Accounting helps a company regulate and maintain a healthy cost structure internally.
An Accountant’s role is to contribute significantly to the company's growth by providing proper accounting functions and help in an organisation’s decision-making.
For this reason, it is recommended to have your Accounting, Audit and Management services outsourced to an experienced accountancy and audit firm that will help you at every step.
We at Jaxa Chartered Accountants, with our team of experts, offer a wide range of services, including Auditing, Accounting, Management and Software Consultancy services that cater to all the needs of your business.
Contact Us, to avail our Accounting and Consultancy services.