Accounting services are considered to be the domain which requires 100% accuracy for the simple reason that the accounts of any business cannot afford any discrepancy in the amounts or entries and totals. An accounts payable is what the business needs to pay and an accounts receivable is business revenue. It is simply not affordable to let any of these suffer from any sort of loopholes.
However, before getting into the details of various accounting processes it is important to understand the various types of accounting processes existent in any business.
Accounting processes can broadly be classified into the following types:
- Revenue Processes
- Disbursement Processes
- General Accounting and Bookkeeping Processes
- Fixed Asset and Capital Accounting Processes
- Cost and Inventory Accounting Processes
- Financial reporting and analysis
- Let us examine all these categories in brief and then probably in this article or in another we will try to look at the sub – classification of these categories.
Revenue Processes –
Revenue processes, as their name indicates are related to revenue. They are specifically related to inflow of money in the business. Accounts receivables, sales orders and customer invoicing – all fall within this range. In other words, revenue processes are about money that is to be earned.
Disbursement Processes –
On the other hand, disbursement processes are related to expenses. These can be related to various kinds of disbursements or payments like – Accounts payable, travel and entertainment expenses (within the organization), cash disbursement processes, or processing the documents related to the letter of credit. In other words, these are all processes related to outflow of money.
General Accounting and Book-keeping Processes
General accounting and book-keeping processes are about maintaining overall ledger accounts. This also means that the book – keepers ensure accuracy of timely entries and regularly take care of updating accounts chats. This process also includes generating trial balances and closing accounts as and when required. Further bank reconciliations and account reconciliations along with preparation of financial statements like balance sheets, income statement and cash – flow statements etc. are also taken care of in general accounting and book – keeping.
Fixed Asset and Capital Accounting Processes
These process are meant for businesses to maintain depreciation tables and schedules, maintain the accounts that are a work – in – progress as well as the account for write – offs and valuation adjustments. They also take care of reconciling the ledger entries with fixed asset accounts.
Cost and Inventory Accounting Processes
In cost and inventory accounting, the accountants take care of developing and updating costs, maintaining inventory records and performing variance analysis.
Financial Reporting and Analysis
While I have tried to cover as many accounting processes as possible, one always needs to remember that finance and accounting aren’t two disconnected branches of business. In fact finance strategy and financial research and analysis eventually depends on the accuracy of the accounting operations. So, another process that is covered in accounting services is financial reporting and analysis.
This primarily includes:
Financial analysis like break – even analysis, ratio analysis, IRR and NPV analysis
Preparation of annual, quarterly and monthly financial management reports
In some situations, formulation of business plans is also done by the same professionals.
Financial modeling – which includes preparation of income statements, balance sheet projections and cash flow models etc.
Accounting and finance is a segment of any business that is pivotal to accurate planning, strategy and capital flow management. In other words, it is pivotal because money matters. We are Kencone – Sacramento accounting firms have worked with many clients and have experience in this field.