The 4 Basic Types of Accountancy

There are many subfields and specialties within the accounting industry. However, there are 4 basic types that individuals will encounter.

Individuals that operate a business or are self-employed may have an accountant that maintains the records for their business and personal account.

Financial Accounting

This has a focus on reporting the financial information of an organization. Statements are prepared for regulators, investors and suppliers.

Management Accounting

This is for internal use by management. It has an emphasis on analysis, measurement and reporting.

Tax accounting

In this type of accounting, the professional prepares tax returns, payments, and ensures that tax deadlines are met. They do this for individuals, small businesses, large corporations, and organizations. This is the type of accounting with which most individuals are familiar.

Cost Accounting

The accountant focuses on determining a company’s variable costs for production and services based on its organization’s structure.

Why Accounting is Important for Businesses

For an enterprise to survive and grow, owners must know how much they’re spending for expenses that include labor, production costs, overhead, and liabilities. These expenses determine profit and losses. An accountant keeps clients advised of these essential numbers, allowing them to control costs, make informed decisions and plan for the future.

Accounting for Individuals

Individuals don’t have to own a business to benefit from the services of an accountant. The professional is able to help clients take advantage of all the credits and deductions to which they’re entitled, thereby reducing the amount of taxes they owe.

Tax Preparers vs Accountants

A tax preparer isn’t necessarily an accountant. Tax preparers can’t perform all the same services as an accountant. Kiosks spring up everywhere during tax time. While these tax preparers are capable of completing and filing taxes for the average person, people with a business or are self-employed should consult an accountant.

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Accounting
posted by mavadmin
October 1, 2023

The Role of Accounting in Supply Chains

The world discovered during the pandemic the integral role that supply chains play in delivering goods around the globe. They also discovered the disastrous consequences when those supply chains are disrupted. Your accountant can play a major role in the management of your personal supply chain network.

Acquisition and Distribution

An effective supply chain management system for any business relies on three elements. The first is reducing costs, followed by increasing the speed of products from the source to the customer, and finally, compressing that cycle of acquisition and distribution. A variety of factors at any point in the process can affect any company’s bottom line, though it will hurt smaller enterprises first.

Accounting, Costs and Logistics

Accounting is a critical component of logistics, whether you’re operating a small mom-and-pop business or a billion-dollar company. One of the many services your accountant provides is helping you to lower your costs and operating more efficiently, which can be accomplished through supply chain management. The result is cutting of expenses, getting products from vendors to you quicker, and out to customers faster and at a lesser cost to you.

Good supply chain management reduces your cost, helps you remain competitive, and increases profitability.

Strategic Planning

Your account will provide you with analytics, an economic perspective, and help you create strategic financial plans – all from an objective viewpoint. You can then evaluate the information, anticipate challenges, and prioritize opportunities.

Final Outcomes

The ultimate decision on your supply chain is always yours. The job of your accountant is to assist you in reducing cost and waste, while increasing financial flexibility. Your accountant will provide you with the information you need to make informed decisions that are best for your company.

Some accountants also have specialized expertise in supply chain management. It enables them to be an active partner with others in the supply chain for its establishment and implementation. Most importantly, your accountant will provide you with options to reduce costs, operate more efficiently, and boost revenues.

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Accounting
posted by mavadmin
October 1, 2023

The Father of Modern Accounting

The profession of accounting is one of the oldest in existence. It’s been practiced for centuries and can be traced back to the 13^th century

where it was being used to great benefit by the Venetians. However, Italian mathematician, Luca Pacioli, was the first to describe double entry bookkeeping in his 1494 book. The method was in use by the Venetians during the Italian Renaissance. That publication earned him the appellation of “Father of Modern Accounting.”

Earliest Accounting

Even before Pacioli and the Venetians, a rudimentary form of accounting was being used by the Mesopotamians in 7500 B.C. They used a system of clay objects, each of which represented a specific type of goods, the number and their financial worth. The Mesopotamians even kept an account of labor and costs.

Pacioli Taught de Vinci

The mathematician lived with Leonardo de Vinci and instructed him in math. Pacioli was also known as Luca di Borgo in reference to his birthplace of Borgo, Sansepolcro, Tuscany. He was educated in what was required to be a merchant.

Pacioli’s Knowledge

In his book, Pacioli described the use of ledgers and journals, emphasizing the need for balancing credits and debits at the end of each day. Also included was the information on recording assets, accounts receivable, expenses, income, capital, and inventory. In his book, he introduced the rest of the world at that time to income statements and balance sheets. Pacioli also proposed a code of ethics for accountants.

Pacioli’s Impact on Accounting

His description of double entry accounting revolutionized the way that businesses began overseeing and managing their operations. It improved the efficiency of enterprises and helped owners achieve greater profitability. The essentials of double entry accounting have changed little over the centuries. The information contained in Pacioli’s book is still relied upon today by lending institutions, investment agencies, not for profit organizations, and businesses – a gift to the financial world from the “Father of Modern Accounting.”

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Accounting
posted by mavadmin
June 30, 2023

Accounting Tips for Entrepreneurs

Most people hear the term entrepreneur and immediately envision a startup company in the tech industry or similar field The truth is that there are millions of entrepreneurs, many of whom are operating businesses in the gig industry. Whether an individual is a first-time business owner or a serial entrepreneur, there are some essential accounting tips they need to know.

Expenses

Create a budget. Cash flow is the life blood for an entrepreneur. Cash flow issues are the primary cause of business failure. It’s essential to keep careful watch over expenses. Use bookkeeping software to make the process easier.

Cash or Accrual

A cash-based accounting model records expenses and revenue when the money is paid. It’s good for small businesses, those that offer professional services, and businesses that don’t maintain an inventory. An accrual model records revenue when it’s earned instead of actually received. It’s a better solution for larger companies, those that are more complex in nature, and businesses that keep inventory.

Write-Offs and Deductions

Maintaining receipts ensures entrepreneurs receive all the write-offs and deductions to which they’re entitled on their taxes. That can include vendors, transportation, and monthly bills associated with operating the business. Be sure to categorize expenses.

Credit

Don’t rely too heavily on credit cards It’s easy to use credit as a means of supporting the business, but entrepreneurs can easily find themselves so far in debt they’re unable to even make minimum monthly payments on their card.

Predict the Future

Keep an eye on financial trends. A realistic financial forecast is essential to plan for future sales, expenses and income.

Separate Accounts

Never combine personal and business accounts. Its easier to monitor business health and prevents entrepreneurs from being responsible for business-related debts.

It’s the Law

Entrepreneurs need to know and understand the law regarding the type of business they have. Anyone in business for themselves will have tax responsibilities and expenses that hourly or salaried employees don’t. Hiring an accountant is a smart strategy. Individuals can benefit from an accountant’s experience, knowledge, and the professional can help keep a new business on track for success.

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Accounting
posted by Mark Battalini
April 27, 2023

12 Common Accounting Terms Explained

Accounting professionals use a variety of terms and acronyms that are common within the
industry. However, those terms may sound like a foreign language or a magical incantation to
those that aren’t familiar with them. Typically applied to businesses, they can also be relevant
in relation to individuals.
Accounts Receivable
Often abbreviated as AR, it’s the money that customers owe a business for products or services
that have been provided/delivered.
Accounts Payable
Abbreviated as AP, it’s the money a company or business owes their suppliers and vendors for
goods or services.
Assets
An asset is anything that has current or future monetary value, such as rental property, patents,
vehicles, and equipment.
Balance Sheet
It’s a financial report providing a summary of what a company owns, owes, and shareholder
equity.
Capital
Known as CAP, it represents the value of an asset such as goods or cash.
Cash Flow
CF is the revenue and anticipated expense a business expects to generate.
Equity
Referred to as QE, in its simplest form, equity is what a company has when debts (liabilities) are
subtracted from assets.
Liability
There are both long-term and short-term liabilities. A short-term liability (STL) is money owed
within a year. Long-term liabilities (LTL) are money owed over multiple years.
Limited Liability Company
LLCs have a business structure in which owners/members can’t be sued for debts or liabilities
the company incurs.

Net Income
Net income (NI) is also known as net profit. It’s the money a company makes after subtracting
all expenses from all income generated.
Return on Investment
ROI is the amount of financial gain/profit that’s expected to be made compared to the price
that was paid (invested).
IRA
An IRA or Roth IRA are retirement savings accounts. Individuals can divert pre-tax money to an
IRA and the funds aren’t taxed until they’re withdrawn. A Roth IRA isn’t tax deductible, but
funds aren’t taxed when withdrawn.

What are the Best Accounting Practices to Use for an Online Business?

Low overhead costs, greater scalability, and the ability to work from anywhere desired makes
an online business appealing. However, online business owners are subject to the same
requirements as brick-and-mortar stores.
Hire an Accountant
Many people are good at operating a business, but lack money management skills. Meeting tax
deadlines and having up-to-the-minute financial details are just some of the benefits of hiring
an accountant. The professionals have experience, strategies and highly specialized software.
They provide multiple financial services, relieve stress on owners, and enables individuals to
focus on operating their business.
Budgeting
A realistic budget is an integral part of operating any business endeavor. Doing so will tell
owners if they’re overspending, if collections are slow, and allows individuals to make
adjustments as needed.
Business Software
For those determined to take care of the financial aspects themselves, there are business
accounting software programs that can be used. However, they don’t have the specialization of
those utilized by accountants.
Entering Data
It’s critical to enter receipts, invoices and all transactions immediately to ensure accuracy. It’s
necessary to track income and expenses for tax purposes. It provides a record of business
health. Payroll will also need to be addressed if the business has employees.
Taxes
Business owners need an excellent grasp of their tax obligations and filing deadlines. There are
self-employment taxes and other expenses for which business owners are liable and for which
they must plan.
Financial Changes
Tax laws change quickly and they can adversely affect any business owner that doesn’t see
them coming. Staying informed of those changes will help individuals protect their enterprise.
Business owners must stay informed of issues affecting their industry.
Follow the Financials

Go over financial statements monthly to understand the financial state of the business. Those
statements will indicate areas where the company is doing well and where improvement is
needed.

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Accounting
posted by Mark Battalini
January 29, 2023

What’s Typically Included in Accounting Services

An accounting service provides a variety of services that are an integral part of operating a financially solvent business and maintaining compliance. It’s essential that Individuals speak with several firms before choosing one to ensure that it will be able to meet business needs.

Some accounting firms offer a comprehensive range of services, while others specialize in one or more areas. Business owners may have requirements beyond bookkeeping, payroll and tax filing. It’s critical that the accounting service provide the services unique to a particular business operation.

Bookkeeping and Payroll

Owning a business doesn’t automatically mean that the owner is good with the financial responsibilities of operating an enterprise. Accounting firms can process payroll, issue checks, and provide the appropriate forms for onboarding new employees. The firms help business owners monitor cash flow and may offer services for accounts payable, receivable and past due.

Taxes

An accounting service will provide advice and assistance in planning for tax time, prepare the necessary documents, and file federal and state taxes. The firm can also represent a client in IRS audits and reviews. Accounting services work closely with clients to identify beneficial strategies and business structuring to take advantage of tax laws. Services ensure that clients are in compliance with state and federal regulatory and tax laws.

Valuation and Financing

Businesses want to grow and that may include obtaining a loan to purchase new equipment or expand a facility. It can also encompass mergers and business buyouts. An accounting firm can provide the documentation to prove the company’s valuation, worth and growth for banks or investors.

Estate Planning

Businesses have needs for estate planning that are unique An accounting firm is adept at identifying those needs. The firm will work with an attorney skilled in estate planning to establish a family trust or business ownership transfer.

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Accounting
posted by Mark Battalini
January 1, 2023

Businesses Should Prepare for Tax Season Now

For those that own a business or are considered self-employed by the IRS – begin preparing for tax season now. There’s a mountain of documentation to collect. Waiting until the last minute can result in fines and other penalties.

Organize Documents

A substantial amount of tax reporting begins in January. There will be a variety of final documents that must be available when preparing a tax return. Preparation is especially important for small business owners and those considered by the IRS to be self-employed.

Prepare Early

Business owners can begin their returns as soon as they have the necessary documents. They can utilize personal tax software or use online filing sites, but the best solution is to hire a tax professional. Even though tax returns can be prepared early, the IRS won’t begin accepting them until a time the entity will announce.

Documentation

It’s far less stressful and more cost effective to have a tax professional do the work. The expert will need to understand the business and its financials. Individuals should be prepared with their employer ID number, along with receipts from sales and services, expenditures, and bank accounts, to name a few.

All of these documents and more are required for a tax professional to ensure a client is receiving all the deductions and credits to which they’re entitled, and to take advantage of any new state or federal tax laws. They can also ascertain if the business would benefit from itemizing expenses and calculate projected payroll taxes.

Extension

If necessary, a tax professional will be able to file for an extension, which gives business owners an additional 6 months of leeway to submit their tax return. An extension provides a grace period in which to file the return, but business owners will still have to pay any taxes that may be due on time.

An extension can be especially beneficial if any clarification is needed or if all of the essential documents aren’t immediately available. For those in some industries, there may be compliance and regulatory issues to consider.

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Accounting
posted by Mark Battalini
November 20, 2022

How Budget Calculators Can Help Guide Your Spending

Very few people have a good grasp of their spending habits or how much money they could save by simply eliminating a purchase or two every week. That’s when home budget calculators can help you spend less and save more.

A budget is especially important during times of inflation, job loss, or even saving for a major purchase or life event. Only 32 percent of the U.S. population regularly budget. A variety of budget calculators are available that can make a significant difference in spending habits and they’re easy to use.

Financial Stability

Maintaining a budget is the pathway to financial stability. Instead of buying things that catch your eye with no thought to when the rent is due, it can help you plan for long- and short-term goals. That may include a down payment on a home, purchasing a car, or even starting a family.

Pay Bills on Time

Living within your means is a phrase that’s gained renewed popularity. It means don’t spend money you don’t have. People that don’t budget have to worry about taking from one area to pay for another. Don’t rely on credit cards to bridge the financial gap you’ve created. It’s easy to overspend and find yourself drowning in debt. Budgeting enables you to pay the bills on time, which will also help build your credit rating.

Emergency Fund

A home budget calculator can help you establish an emergency fund. You’ll be better prepared in the event of an injury, illness, job loss or other unfortunate event.

Retirement

Most people qualify for Social Security in their later years, but the program was never designed to be your only means of support when you stop working. That’s what a retirement fund is for and a budget enables you to save enough to have a safe and happy retirement.

Spending Habits

Everyone has bad spending habits that result in budget deficits. It may be dining out too often, expensive coffee, video games, or trips to the spa. A budget calculator will show you how you’re spending your money, the amount, and easy ways where you can cut back and save.

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Accounting
posted by Mark Battalini
October 9, 2022

Will Payroll Services Save You Money?

Small business owners are always looking for ways to save money and many make the mistake of trying to handle payroll duties on their own. Even if you only have a single employee, payroll services can save you money. There are serious fines and consequences for not meeting reporting deadlines or keeping accurate tax records for employees.

There are many facets to maintaining payroll ranging from employee withholdings to business deposits and withdrawals. It may include paid time off (PTO), 401k deductions and garnishments. It requires a significant amount of time and effort that could be better spent growing your business.

Flexibility

Small business owners face a variety of challenges and a payroll service helps you remain flexible and meet those challenges as the business environment and economy changes. You could be encountering supply chain issues or need to quickly scale up production to meet increased demand. Payroll services enable you to keep ahead of changing circumstances and minimize business disruptions.

Rules and Regulations

Payroll services enable you to remain compliant with state and federal reporting requirements and deadlines. You’ll also be compliant with the many regulations governing employee benefits ranging from retirement funds to insurance coverage.

Fines and Penalties

You can run afoul of the IRS for multiple reasons ranging from failure to pay business income tax, underpayments or late payments. The fines and fees associated with even small infractions increase over time and limits cash flow to your business. A payroll service reduces your risk.

No Degree Necessary

You don’t have to have experience or a degree in accounting. Your payroll company has the knowledge and experience to attend to all the details. They’ll provide you with accurate accountings and keep you informed of the financial health of your business.

Security

You need to maintain security against physical and cyber incursions. A data breach at your company can cost you dearly, leave your business vulnerable to ransomware attacks, and compromise employee data. Payroll services utilize advanced security measures to keep sensitive information about your enterprise safe.

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