The comprehensive preparation of records for all financial transactions in a systematic way in a business is known as accounting. Since there are agencies that oversee activities such as auditing in a business as well as the entities required to collect tax, accounting may also include activities such as making summaries of the financial transaction reports, analysing them and making reports on all these transactions. Accounting is very crucial for all business and depending on the size of the organizations, accounts can be handled by accountants and bookkeepers for the small entities and a finance department with a number of employees for large companies. It is through the reports provided from the accounting sections that enables businesses to make informed decision. Individuals that are mandated with accounting activities in a business can do several roles such as bookkeeping and tax preparation.
Bookkeeping involves recording all transactions in a business such as sales, purchases, receipts or payments that have been made to an individual or another organization. There are various record books where a bookkeeper is required to record both the cash and credit transactions which includes the supplier’s ledger, daybook, customer’s ledger and the general ledger. An accountant is able to come up with reports on the financial situation of the business when the bookkeeper’s record have been done properly. Single-entry and double-entry bookkeeping system are the two common entry systems in bookkeeping. It is only the expense and income accounts can be recorded in the journal for expenses and revenue single-entry bookkeeping method. It is important to have two entries for accounting in order to make records for the transactions and can occur in the liability, asset, expense, equity or the revenue accounts in the double-entry bookkeeping system.
Another duty in accounting is tax preparation where appropriate tax returns can be filed for the business to the responsible body every year. Other people who can do the tax preparation includes tax preparer, certified public accountants, attorneys or even enrolled agents at a fee. Tax preparation through processes such as calculation of the total tax amount and filing the tax is crucial for a business which ensures that it is compliant to the laws of the region it operates.
Individuals who are mandated with accounting roles need to have certain qualities to ensure that they carry out quality work. Since financial information in a business is very important, it needs not to be exposed to unauthorized persons hence the people need to be professional and ethical. Accountants need to have a proper communication ability both in written form and verbal to ensure that they have a clear understanding of all issues in pertaining to finances in the business. It is also important that they relate well with the customers when serving them and also addressing issues.