The Crucial Responsibility Of Bookkeeping Accounting Essay

The important duty of clerking and accounting in concern has increased the demand for clerking and accounting occupation or services worldwide. Because of the high demand, it attained bookkeeping and accounting as two of the most profitable and worthwhile profession in the universe. Accounting and clerking are both important instrument in matching the fiscal action, modus operandi and status of a concern entity.

Bookkeeping is the logical recording of a company ‘s fiscal events or concern minutess. In clerking, there are two ways which are single-entry and double-entry.

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Accounting is the process of finding, ciphering, entering and conveying economic information to authorise advisable and wise declarations and findings by users of the information. Besides, accounting is a tool of analysing the fiscal minutess of a concern or a company comprehensively every bit good. Accountants who are responsible to the accounting, they require following a batch of regulations and ordinances. Furthermore, accounting is besides permit a concern to dissect the fiscal public presentations and acquire the net net income. Furthermore, accounting can be defined as the clerking procedures concerned in constructing a fiscal record of concern minutess and in the readying of statements refering to the assets, liabilities, and runing consequences of a concern.

Question 1

To: Peter

From: John

Management Accountant

Sphinx Sdn Bhd

Capable: Business Development

Date: 1st of March 2013

From your petition on get downing a concern, I would rede you as below the signifier of organisation foremost. Sing the signifier of organisation, there are three chief types of concern that you may see and take. First type of concern is exclusive proprietaries. Sole proprietary is a concern owned by a individual. The proprietor may use employees or run on his or her ain. The proprietor of the concern has entire and limitless personal liability of the debts incurred by the concern. The proprietor possesses all the assets of concern and the net incomes created by it. They besides charged with whole responsibility for any of its liabilities or debts. Advantages are free to run the concern, capable to less regulative demands and low start-up costs, net incomes from the concern flow-through straight to the proprietor ‘s personal revenue enhancement return. The disadvantages are limitless liability. The owner is personally apt for the debts incurred by the concern.

The 2nd type of organisation is partnership which is a assortment of concern in which two or more people manage for the general aim of doing net income. Sing partnership, each spouse has entire and limitless personal liability of the debts devoted by the partnership. Partnerships are easy to put up ; wider capital base and contributes to different sets of accomplishments to run the concern. Besides, the net incomes from the concern flow straight through to the spouses ‘ personal revenue enhancement return. However, apt for the debts even if it was caused by the actions of the other spouse. It is capable to limitless liability. The partnership will stop if any one of the spouses resigns or dies.

The 3rd type of organisation is corporation which is for net income, limited liability entity that has a separate legal personality from its members. A corporation is owned by multiple stockholders and is overseen by a board of managers, which hires the concern ‘s managerial staff. Corporations are capable to limited liability. In Malaysia, corporations are categorized into private and public companies. Private companies are known as Sendirian Berhad ( Sdn. Bhd. ) and public companies are known as Berhad ( Bhd. ) . The disadvantages of corporation are requires more clip and money than the others, may ensue in higher revenue enhancements. Dividends paid to stockholders are non deductible from concern income therefore this income can be taxed twice. After explained the signifier of organisations for you, I advised you to get down a exclusive proprietary concern foremost. It is because you merely retired as an applied scientist late so that you do non hold any experiences to run a concern suitably but exclusive owner may command his concern by his ain ways. Furthermore, you do non hold any spouses so that you can non get down a partnership concern. Furthermore, your capital of your concern RM300000 which is non plenty for get downing a corporation concern as good and it is rather danger for you to get down a concern by using others to pull off your company.

On the other manus, accounting system is besides the of import tool for get downing a concern after you decided the type of your concern. An accounting system is the procedures and techniques for assemblage, categorising, shortening, and describing a concern ‘s fiscal and pull stringsing information. The proprietor of a company has to understand the net incomes and assets he owns and the liabilities that he owed to the others. Sing accounting systems, it may assist the proprietor to record and maintain overall the concern minutess consistently. Thus, an accounting system is to allow the man of affairs to run his concern easy and swimmingly.

There are two types of accounting systems which is manual and computerized accounting system. The advantage of manual accounting system is cost nest eggs because the computerized accounting system is rather expensive. The proprietor may salvage the costs by making the accounting manually. Besides, the proprietor may make manual accounting with freedom in anyplace and anytime alternatively of computerized accounting system by utilizing computing machine. On the other manus, the benefits of computerized accounting system are clip nest eggs and velocity, truth, cost nest eggs, automatic papers production, direction information and up-to-date information. First, it can salvage a batch of clip with fewer errors. Furthermore, informations entry against the computing machine with its formatted screens and constitutional databases of clients and supplier information and stock records can be carried out far more rapidly than any manual processing. Furthermore, there is less chance for errors as merely one accounting entry is required for each dealing instead than two or three for a manual system. Although the cost of buying system is expensive the proprietor can salvage money from using staffs to make audit. Speedy and precise bills, recognition notes, purchase orders, printing statements and paysheet paperss are all done automatically. In add-on, monthly studies can be formed by the direction information which will assist directors to detect and form the concern. Last, all the accounting records and history balances are automatically updated. I would rede you to see and take the computerized accounting system alternatively of taking the manual accounting system. For your exclusive proprietary concern, it is eldritch that I asked you to take this as you do non hold any accounting footing. However, if I am non mistaken, you may inquire your married woman to assist you to make accounting daily work as an comptroller. Computerized system may assist your married woman to manage it easy and accurately because she still can manage the other company ‘s histories.

Accounting Procedure

The flow chart shown as above is accounting procedure which is the sequences of activities get downing with dealing and ends with the shutting of the books for your mentions. There are nine stairss in this rhythm which are garnering and measuring informations from minutess and processs, seting those minutess into the general diary, posting entries to the general leger, fixing an unadjusted test balance, seting entries decently, fixing an adjusted test balance, sorting the histories into the fiscal statements, shuting the books and last fixing a post-closing test balance to look into the histories.

Question 2

Entire Assets = Total Liabilities + Shareholders ‘ Equity

The income statement is a statement of fiscal public presentation while the balance sheet is a statement of fiscal place. I agree with this statement. Income statement reports the transform in fiscal circumstance because of the processs of a concern. The general purpose of it is to find a company ‘s fiscal public presentation over a specific accounting period, ever is one twelvemonth. However, the clip period enclosed by the income statement may change depending upon the demands of the stakeholders. Income statement will demo the net net income or loss of the concern in that accounting period as good. Public corporations are required to register quarterly and one-year income statements with the Securities and Exchange Commission ( Carl S. Warren, Survey of Accounting ) .

However, balance sheet is the fiscal statement summarizes a company ‘s assets, liabilities and capital, which besides known as stockholder ‘s belongings at an exact point in clip. These three balance sheet parts let investors cognize about the company owns and owes, every bit good as the sum invested by the stockholders. Besides, there is a expression must be followed in balance sheet every bit shown as below.

The illustrations of income statement as below had shown the company ‘s earning and write offing money public presentations by naming out the sum monthly. However, balance sheet illustrations had shown the assets, liabilities and stockholder ‘s equity of the company. These three sections of balance sheet represent the fiscal place of the company every bit good. Thus, I wholly agreed with the statement which said income statement is a statement of fiscal public presentation while the balance sheet is a statement of fiscal place.


Example of income statement


Example of income statement 2

Example of Balance SheetBalance_sheet1_450.jpg


Example of Balance Sheet 2

Fiscal statement analysis is the method of measuring relationships among fiscal statement necessities and doing comparings with related information. It is a utile tool for investors, fiscal analysts, creditors and others in their decision-making procedures related to stocks, bonds, and other fiscal instruments. The intent of analysing fiscal statements is appraisal of old public presentation and current fiscal place and to do anticipations about the future public presentation of a company. Besides, three major types of fiscal statement analysis are by and large acknowledged as horizontal analysis, perpendicular analysis, and ratio analysis.

There are many users of accounting information which can be categorized by internal and external users. For internal users, accounting information usually shows in the signifier of direction histories, budgets, prognosiss and fiscal statements. Internal users are direction, employees, and proprietors. Management has to analyze the organisation ‘s public presentation and place and taking proper actions to develop the company for future planning, new staffing and commanding. All these determinations are overdone companies ‘ merchandise monetary values, company ‘s merchandise cost, salary and net income border ; they can happen these inside informations after survey accounting information. Besides, employees have to measure the public presentation of direction and it related to their wage and occupation security. So they use accounting information every bit good, if company ‘s fiscal statement shows a big sum of net income, so employees can demand more salary, fillip and inducements. Furthermore, proprietors have to analyse the profitableness of their investing and find any future class of action. They need accounting information to cognize whether they have obtained appropriate return on investing. However, external users are investors, fiscal establishments and authorities. Investors used the fiscal statements to judge the fiscal power of a company to do sensible investing determinations. Besides, fiscal establishments that are besides known as the loan creditor group would see on the current and future profitableness and growing chances of the entity. Besides, authorities will analyze whether the revenue enhancement paid by them is precise and is in line with their fiscal power. So, after read-through the degree of gaining of company, they have to amend revenue enhancement rates.


The Accounting Cycle10677016-illustration-of-the-accounting-cycle.jpg


Income Statement


Balance Sheet


Users of accounting information


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