Accountancy or accounting is the measurement, interpretation, and communication of financial and non-fiscal information about companies and enterprises. The term is usually used to refer to the documentation prepared by an accountant, a bookkeeper, or accountants for the preparation of financial reports and statements. In business organizations, accounting includes financial reporting such as the financial statement, the income statement, and the balance sheet.
A company’s accounting procedures are usually regulated by policies and guidelines developed by the Securities Exchange Commission (SEC). These policies and guidelines specify what accounting transactions should be made, the degree of accounting risk that must be considered, and what the resulting financial statements and reports should portray. Auditors also play an important role in the review of accounting practices. They analyze the data that have been collected and come up with a report concerning the accounting transactions that are conducted. Auditors are primarily concerned with three areas: control, responsibility, and reliability. They examine the procedures followed by the company, management’s attitude toward the regulation of accounting, and the results of audit.
There are several types of accountants: property accountants, income accountants, public accountants, financial accountants, tax accountants, and internal auditors. The scope of responsibilities of these accountants varies significantly, with some accountsants performing work within their areas of responsibility, while others may perform audits on a freelance basis. Regardless, of the type of accountant, an accountant’s main role is to process and summarize financial records. As such, the primary responsibilities of accountants include the preparation and review of accounting transactions and statements; preparing reports; analyzing and evaluating financial records; testing financial transactions and documents for accuracy; advising clientele concerning transactions and accounts; advising government authorities on any potential tax frauds; and advising owners of companies on ways to reduce their financial risks.
There are many different stages in the accounting process. The initial process is that of collection. In order to process financial statements, accountants must gather information from the financial records that they have in their possession. This information includes information on expenses, sales receipts and debits, inventory, current and previous financial statements, and estimates.
A number of methods are employed by accountants in order to process these financial statements. One method is manual accounting. Accountants may use pencil, paper, computer programs, and manual data entry systems in order to process the transactions. In modern computerized accounting, every transaction is entered into a database. The database stores information regarding every transaction, including all the parties involved in the transaction, the amount, date, and amount due. This method has made the accounting process much more efficient, as it requires only a fraction of the amount of time that would be required if every transaction were manually entered.
Another method of accounting is called preventive accounting. Pertinent financial transactions are recognized before the end of the reporting period. This means that in case there is a chance that a particular transaction may not be eligible for inclusion in the ledger, the function can be temporarily performed instead of reporting the transaction to the office. The most popular preventive method is reconciliation. It consists of performing a procedure in which the accountant compares the records of the transactions entered in the ledger against the records that are obtained from the outside sources.