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Wednesday, February 21, 2024

What is Accountancy? Types of Accountancy

Accountancy or accounting is the process of maintaining the income and expenditures of a business. Accountancy was formed thousands of years before and the concept of double-entry bookkeeping and debits and credits was organized in 1494 by Luca Pacioli.

Accountancy is like a large machine that we put raw financial information into records of all our business transactions, taxes, projections, etc. that then spits out an easy-to-understand story about the financial state of our business. Accountancy tells us whether or not we are making a profit, what our cash flow is, what the current value of our company’s assets and liabilities is, and which parts of our business are actually making money.

Bookkeeping is a process of abstracting and recording financial transactions. When the data is provided in reports for the use of individuals or companies outside the organization, then the process is called ‘financial accounting’.

Importance of Accountancy

The process of financial accountancy is important because it deals directly with a company’s money, specifically all the expenses and income related to its day-to-day business operations and investments. That information can be recorded incorrectly, not at all, or improperly cataloged.

Every transaction requires be recording and accounting for accurately so that a company’s financial statements are accurate. Inaccurate reporting may lead to severe problems for a company, implying it may not be able to pay its debts, or money set aside for investing is not available.

Accountancy vs bookkeeping

Accountancy and bookkeeping overlap in many ways. Some say bookkeeping is one aspect of accountancy. But if we want to break them apart, then we could say that bookkeeping is how we record and categorize our financial transactions, whereas accountancy is putting that financial data to easy use through analysis, strategy, and tax planning.

Types of Accounting

There are several types of accounting range from auditing to the preparation of tax returns. Accountants need to expertise in one of these fields, which leads to the different career routes mention below:

  • Financial accounting
  • Public accounting
  • Government accounting
  • Forensic accounting
  • Management accounting
  • Tax accounting
  • Internal auditing

How to get the best accountancy services

There are many accounting and consulting firms (like MJH accountancy) that offer professional accountancy services. We need to be very careful when choosing the accounting and consulting firm so that we can get the best accountancy services for your business.

Consider the things while choosing an accounting and consulting firm which are mention below:

  • Certification and Experience
  • Quality Assurance
  • Flexibility

The accountancy cycle

Accountancy starts the moment we enter a business transaction any activity or event that involves our business’s money into our company’s ledger. Recording business transactions is a way that is a part of bookkeeping. Bookkeeping is the initial level of what accountants call the “accountancy cycle”. A process intended to take in raw financial information and spit out accurate and steady financial reports.

The accountancy cycle has six major steps:

  1. Record and analyze transactions (maintaining invoices, bank statements, etc.)
  2. Post transactions to the ledger (according to the principle of double-entry accounting)
  3. Serve an unadjusted trial balance (this includes listing all of our business’s accounts and figuring out their balances)
  4. Prepare to adjust entries at the end of the period
  5. Prepare an adjusted trial balance
  6. Prepare financial statements

Conclusion

Accountancy is the process of classifying, measuring, processing, analyzing, recording, and reporting the financial information of a business.

Claire James
Claire Jameshttp://www.firedigitaluk.com
Claire is an accounts manager at Fire Digital UK, an online publishing and content marketing company based in the North West.

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