Primarily accounting management broadly can be divided in two parts bookkeeping and accounting:
Bookkeeping is the recording, on a day-to-day basis, of the financial transactions and information pertaining to a business. It ensures that records of the individual financial transactions are correct, up-to-date and comprehensive. Accuracy is therefore vital to the process.
Bookkeeping provides the information from which accounts are prepared.
Starting and maintaining solid, professional accounting practices is essential for the growth of a business.
Accountancy is the process of managing the income and expenses of a business
Accounting refers to the process of measuring, summarising, and communicating the financial information produced by bookkeeping to classify and explain account information to relevant parties such as shareholders and managers.
The use of this information also makes it possible to forecast future financial developments, analyse different areas of the business and evaluate business potential.
Reports in accounting
Three reports are typically generated in financial accounting and cover a specific, predetermined accounting period:
- Balance sheet: summarises the firm’s assets and liabilities at a given point in time – usually at the end of an accounting period. This report provides a clear idea of the company’s financial standing.
- Income statement: reports the firm’s gross proceeds, expenses, and profit or loss. This report addresses the income and expenses that are commonly used by management to help determine financial standing and decision-making.
- Statement of cash flows: analyses the flow of cash into and out of the business. This report deals only with the cash that moves in and out of the company through various business activities. It also includes income and loss from any investments made in the company name. Keep in mind that ‘cash’ also includes credit payments after the payment is completed.