Types of Accounting: Management, Tax and Financial

Tuesday, 10 Dec 2019

The core functions of accounting and bookkeeping have been evolving with the changing economic scenarios and corporate structures around the world. From merely being a part of the entrepreneur’s repertoire, this profile has bloomed into a specialised service which has become inseparable from the business.

Over the years, accounting has diversified into various branches depending on the needs of the organisations and individuals. To make it simple, an experienced bookkeeper in Melbourne is a multi-tasking professional who has to record a variety of transactions and manage the taxes. However, their job is not limited to these two aspects.

Their vast portfolio includes functions like auditing, financial planning, reporting, management consulting, valuation and taxation. It is quite evident that the profession has come a long way from its data entry and reconciliation of bank accounts days. To know more about the specific types of accounting performed by bookkeepers, take a look at the list given below.

Management Accounting

Commonly known as managerial accounting, management accounting is the process of skilfully organising accounting information to help the top management make informed decisions about various business policies and plan and control the operations.

It is primarily used by the managers in the organisation and does not require the creation of financial statements as it is meant for internal use. It includes both financial and non-financial data which assists in the decision-making process.

Thus processes like budgeting and forecasting, and evaluating business decisions are a part of it. In a nutshell, bookkeepers have the qualification and talent to provide the business managers with all the valuable guidance.

Functions And Advantages of Management Accounting

Management accounting aids in evaluating the profitability of a project or a product so that the entrepreneur can decide its future. It helps in identifying the break-even point, upcoming business challenges, cost of stock in hand, the pattern of company expenditure, allocation of capital for asset acquisition, and determining the pricing of a new product.

Bookkeepers are adept in acquiring all this information and presenting it to the managers at regular intervals. It helps in planning for the future with the support of graphs and charts that aid in decision making.

Also, being cognizant of this information makes the managers better-equipped to identify the bottlenecks before they transform into bigger problems. They can also modify their products and strategies based on this data and enjoy an unbeaten streak in the Melbourne markets.

Financial Accounting

In simple terms, financial accounting is the method of keeping the records of all the business transactions and preparing all the financial statements which are to be utilised both internally and externally.

Nowadays, bookkeepers use cloud-based accounting software in Melbourne to analyse and report all the transactions and get insights into the performance of the organisation and visualise its financial well-being.

Financial accounting is different from management accounting as it requires the presentation of financial statements to the internal as well as the external public. At times, bookkeepers also have to make the stakeholders and associates understand the significance of the inferences made from the reports.

It requires in-depth knowledge of the Australian Accounting Standards and Interpretations (AASs) and must be in accordance with the reporting regulations of the state where the organisation is operating.

Functions and Advantages of Financial Accounting

The financial reporting is done on the five most significant elements of an organisation, namely revenue, expenditure, assets, liabilities and equity. The revenue and expenditure are a part of the income statement while the assets, liabilities and equity are inserted in the balance sheet.

The income statement covers a fixed financial period and is required for tax calculations. The balance sheet helps in the valuation of the organisation in Melbourne. Besides these two, the cash flow statement is another valuable report which represents the inflow and outflow of capital.

The information has to be communicated internally and is used to decide the profit-sharing compensation arrangement with the workers. The summaries of these statements can be used for comparison with competitors in Melbourne to understand the weaknesses and strengths of both the entities.

This is the reason why entrepreneurs are now more inclined towards outsourcing bookkeeping services as they provide a multitude of advantages which can help the business grow.

Tax Accounting

It is a significant part of bookkeeper’s responsibilities as they prepare all the reports to be submitted to the Australian Taxation Office (ATO) and find out ways of reducing the tax burden on the businesses legally.

They are well-versed with all the tax regulations in Melbourne and file the taxes on time to avoid any penalties. The bookkeepers know which taxes are applicable to your business and get it registered for them.

Tax accounting is a necessity to reduce the impact of tax on the business and undertake tax planning. The agents are always aware of all the regulations put forth by the ATO. Most bookkeeping companies in Melbourne have BAS agents who are qualified to conduct tax accounting efficiently.

Functions and Advantages of Tax Accounting

The tax agent is the right person to inform you about the applicable taxes as some taxes are administered federally, and others are meant only for the states. The common taxes include income tax for business, fringe benefits tax, goods and services tax, capital gains tax, PAYG withholding, PAYG instalments, payroll tax, land tax, etc.

While you are calculating these taxes in Melbourne, your bookkeeper keeps a tab on all the business tax deductions that can be claimed by the business to minimise the taxable income. Most of the expenses can be claimed in deductions if they are directly related to the generation of your measurable income.

Businesses also have to submit the business activity statements to the ATO, which can be done quickly online with the help of your bookkeeper. These professionals also keep a record of all the transactions associated with tax and superannuation and present the records as proof to substantiate the deduction claims.        

Conclusion

Bookkeepers are like magicians who wave their magic wand and complete a plethora of tasks that the entrepreneur is only beginning to plan. It takes a lot of research, analysis, quantification and hard work to derive the assessments which prove beneficial for an organisation. The three types of accounting mentioned above are just the tip of the iceberg that is managed by these trustworthy professionals.                

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