Towards A Common Financial Reporting And Financial Accounting Systems Framework For Nigerian Banks

As the banking reforms in Nigeria progress from one stage on to another, each new situation presents its own challenges. While some likely fallout of the reforms can be forecasted with certainty, others emerge with the passage of time. The 31st December 2009 common year-end has become a reality. The banks have forwarded their draft financials to the CBN. The CBN needs to confirm the integrity and completeness of the financial reports before approving them. This presents yet another series of challenges for the Regulator as this time around, their can be no excuses.

One of the reasons advanced for the crises in some Nigerian banks had to do with inaccurate financial reporting. It was adduced that some loss-making financial institutions not only declared profits but paid dividends using depositor funds. The multiplier effect of such actions on the future financials of a firm/bank is at most imaginable. With the common year-end and the adoption of International Financial Reporting Standards, a golden opportunity has arisen for the CBN to rectify these anomalies.

First and foremost, it is important that banks send in their reports using a common financial reporting system framework. This will facilitate the comparison of a banks' financial performance over time and against that of other banks and the industry itself. The risk-based assessment of financial reports is thus simplified. It might be necessary for the CBN to further improve the quality of banks' financial reporting beyond what already exists.

Secondly, it is vital that the 'target examination' of the banks being carried out by the CBN in this wake does NOT simply focus on ascertaining data integrity. There is absolute need to also focus on each banks' financial system integrity. While recalling the popular phrase of 'Garbage In, Garbage Out', data integrity mainly focuses on data accuracy and completeness while financial system integrity focuses beyond data to all the other key elements of the financial information structure. Financial system integrity is definitely more holistic and reliable. To this end, a set of parameters for ascertaining system integrity might be required. The financial regulator must avoid a situation of garbage in garbage out of financial data, as that will fundamentally make inaccurate any information derived from the use of such data.

In addition to the above, perhaps it is also time for the introduction of a common financial accounting system framework for Nigerian banks. The framework should recommend the basic foundations or elements on which the entire financial accounting infrastructure of all banks should be based. This no doubt will take into consideration the nature of banking services in Nigeria. Recommendations for the scope of the charts of accounts, account classifications, internal control systems, financial accounting software, operating procedures/manuals and the likes should be paramount in this objective. Most of all, it is important that the whole system is simplified.

The Nigerian Government intervention which resulted in the injection of six hundred and twenty (620) billion Naira banking stimulus package is no doubt unprecedented. But the real challenge has to do with the implementation of the other remedial measures required to put the financial industry back on the path of recovery, growth and stability. Some of the above recommendations may represent necessary regulatory innovations. While some may argue that such measures will make the industry much more sophisticated, it is vital to note that if simplicity is considered as a guiding principle of the banking reform measures, complications are consequently eliminated.

How To Study Financial Accounting At A Classroom

First - Accounting is not a hard subject to study, and is easy to learn. The major secret to studying accounting is remembering that it is a cumulative study subject based on the first few chapters. Each chapter builds on the previously learned concepts and procedures. The accounting course is organized so that you study the most fundamental and essential concepts and procedures first, then you will be required to build on these concepts and procedures. To study accounting, you must master the first five chapters. These few chapters are the basis for the next chapters. When students run into difficulty, it is generally because they have either forgotten the earlier material or have not study it well enough to move forward.

Second- You need to ask questions from me what topics are important?, why they are important?, and how to use them?. Copying notes from others may not always show you the what, why and how.

Third -Arrive at your classroom a few minutes early. Choose a seat where you can comfort and be heard. Don't be afraid to ask or respond to questions. Try to overcome your shyness doubt. Commit yourself to ask or answer questions in class. Remember someone else in the class is probably wondering about the same thing.

Forth - You need to understand both the reasons and the mechanic of financial accounting. Memorizing information will hurt you later on in the course.

Fifth - A recent study indicated that you will remember 10% to 15% of what was said in class. However, if you write it down, your retention rate increases to 85%. Note taking is essential to learning accounting. You must learn to take notes efficiently, accurately, and quickly so you will not jeopardize your ability to listen effectively.

Sixth - Exchange telephone numbers or email id with at least two classmates. Make arrangements to study with these friends on a regular basis(group studies). Working in groups has benefits. These benefits include increasing your knowledge of accounting and improving your critical thinking and communication skills. If you are able to explain and demonstrate (verbalize) the learning objective to other group members, then you really understand the concepts. Don't be afraid to change study groups if you are unhappy with your original group. Finally, don't allow you study group turn into a gossip group, stick to your accounting.

Seventh - Before going to class review the textbook, study guide, homework assignment, and class notes. Make a list of questions you have to ask teacher. Writing out your questions makes it easier for you to ask teacher in class.

Eighth - Waiting until the last minute does not give you the opportunity to completely understand the learning objectives. If you have completed your homework and are able to verbalize the learning objectives to other members in your study group, then you will do well on the test. If however, you are trying to complete the reading and homework assignments the night before the examination, you will be unprepared.

FBAR: Foreign Bank (and Financial) Account Reporting Rules Expanded With Higher Penalties

The U.S. Treasury issued expanded rules, effective March 28, 2011, requiring U.S. persons to report foreign bank and financial accounts each year. The new rules apply to every U.S. citizen or resident and every entity organized under U.S. law. They must report every foreign account over which he, she, or it has signature authority and every foreign account in which he, she, or it has a financial interest. The reports on Form TD F 90-22.1 must be received by June 30 by the IRS at an address in Detroit, MI. Penalties under the new rules can be the highest balance in the account, up to $25,000 each, and may include criminal penalties (jail time) for willful failures.

Who Must File. The reports must be filed by every U.S. person with a financial interest in or signature authority over a foreign financial account. This includes all citizens and residents of the United States. It also includes all entities formed under the laws of the United States. For this purpose, United States includes the 50 states, District of Columbia, Puerto Rico, the Virgin Islands, and other territories and possessions. The rules require reports by corporations, partnerships, limited liability companies, and other entities, no matter who owns them, if they were formed under U.S. law. In addition, U.S. persons (individuals or entities) that own more than 50% of the vote, value, interest in profits, or capital of any entity with a foreign account must also file, whether the entity is U.S. or foreign.

U.S. persons must report all foreign accounts they own, either separately or jointly. They must report if they are the owner of record, or if another person is the owner of record acting as their agent. In addition, a U.S. person must report an account owned by:

    Any corporation in which the person owns over 50% of the vote or value,
    Any partnership in which the person owns over 50% of the capital or profits interests,
    Any other entity, including an LLC, in which the person owns over 50% of the vote, value, equity, assets, or profits, and
    Any trust of which the person is either the grantor or 50% or more income beneficiary.

Example: John and Mary are unrelated. John owns 51% and Mary owns 49% of JM, a Delaware LLC. JM owns 51% of a Clocks GmgH, a German company. Clocks has an operating bank account at a bank in Frankfurt and a brokerage account with a stock broker in Zurich. John and JM must both report each account. Mary can direct the brokerage to make distributions, but can't sign any checks. Mary must report the brokerage account.

In addition, a person who has signature authority over an account must report the account. Signature authority includes any ability to direct the institution. Example: Fred is a U.S. citizen living in Germany, and is the controller at Clocks. He can sign the Clocks checks, with one co-signer. Fred must report the Frankfurt account.

What Accounts Must Be Reported. Accounts with a foreign branch of any bank, brokerage, or other financial services company must be reported. All of the following must be reported:

    Checking accounts
    Savings accounts
    Brokerage accounts
    Mutual funds with regular net asset value determinations
    Life insurance policies or annuities with a face value

A few exceptions apply. A bank account maintained on a U.S. military base is not considered foreign. Accounts in Puerto Rico, Virgin Islands or other possessions are not considered foreign. Beneficiaries of IRAs do not themselves report accounts maintained by the IRA.

Examples: Jesus is a resident of Puerto Rico. He does not need to report his Puerto Rico bank account, but must report his account in Haiti.

Betty lives in Idaho. She has a whole life insurance policy with Insur AG, a Swiss insurance company. She must report that policy.

Alice lives in Texas. She owns shares of a German mutual fund held for her benefit in her family attorney's name. Alice and the attorney must both report the mutual fund.

Account Value. Reporting is required for every U.S. person who has accounts with an aggregate value in excess of $10,000 at any time during the year. The value of each account is determined by translating the face value of the account to U.S. dollars using the rate for the end of the year as published by Treasury. Where no rate is published, an alternative source may be used (but must be explained).

Example: Harry has a bank account in Elbonia denominated in Drakmas. The maximum value of the account during the year was 1,427,000 Drakmas on June 13, 2010, and nearly zero the rest of the year. Treasury did not publish rates for the Drakma, but the Elbonian Gazette listed the rate on June 13 as $1 = 150 Drakmas, and the rate on December 31 as $1 = 130 Drakma. Harry must report the account at a value of $10,977, and attach an explanation to the form about using the Gazette rate.

Financial Accounting Jobs

Financial accounting is one of the best professions in the list of conventional professions in the history of corporate world. Financial in accounting is essential for all the companies, whatever size or structure it might be in. Accounting jobs get their deserved importance because of Generally Accepted Accounting Principles, according to which it is mandatory for organizations to maintain a book of accounts regarding all business activities performed by them. A financial professional is typically responsible for ensuring accounting of the organization; reviewing subsidiary profit center/segment results; preparation of enterprise footnote disclosures and enterprise consolidating journals; overseeing accounts payable and accounts receivable; processing finance agreements. People look upon on accounting as a promising and long-term career as always there are a variety of positions available at all the levels in any organization around us.

Candidates applying for financial accounting jobs typically have an Associates degree or a Bachelors degree in Accounting, or a CPA/CMA. Prior experience working in this field may be advantageous. For managerial positions, candidates should have 4+ years of relevant experience and be able to demonstrate great leadership skills and the ability to motivate and influence others. Excellent attention to detail and outstanding mathematical ability are two traits of good accountant. Financial jobs in accounting generally require use of MS Office Excel, Tally and other accounting software. Some organizations make use of HRMS software for the purpose of human resource management related accounting. Some employers may offer training opportunities in the area of financial accounting to students which may be paid or unpaid in nature. For financial accounting jobs in government sector, professionals might have to go through criminal background check. Some jobs may be paid monthly, weekly or even on hourly basis. Relocating to other cities for good accounting jobs is a great idea.

The Growing Need of Financial Accountants

The business scenario that we are witnessing at the moment is the most competitive and the most complex that can ever be imagined. Businesses in today's times are revolving around the financial clouts of the organization and the manner in which it can acquire and further expand its operations as well as domain of expertise. In such times, it is really important that the companies realize that there is an urgent need of people who have the expertise in the management of their finances. The people who have the requisite qualification as well as the experience of handling the finances of an organization no matter how so ever tough and the complex the process might be, are called financial accountants.

Some of the key areas in which there is a requirement of the financial accountants are like maintaining a close watch on the movement of finances within the organization, preparing the financial reports of the company, as well as analyzing them and then presenting a proper and the true picture of the reports to the management as well as the decision makers. It is really important that the upper echelons of the organization are always well informed about the true standing of the company so that they can make informed decisions about the future plans of the company.

Another important role that a financial accountant plays in the overall operations of the organization is to keep a tack on all the important resources that are at the disposal of the company. In addition, it is important that they also make a correct evaluation of the financial resources that are being spent on these resources. Maintaining a close watch on the profits made by the company as well as the losses suffered are also the key roles in an organization.

In many cases it is important that the people working in the organization are also well guided about the importance of the taxes and how they can go about filling their returns. These are just a few important roles that the financial accountant plays in the organization. Apart from these there are myriad of domains in which the financial accountant needs to be active to maintain and aggrandize the financial health of the organization.

Top 10 Crests For Managing Financial Accounting

The world is facing difficulties today in balancing the finance. Even a small mistake can hit the sailing of the ship. This growing problem can be stagnated only if, out of the blue a huge wave of finance stuck the market or with the remaining finance, management can be properly insured.

Finance cannot be introduced in the market in the present situation due to the recession, but it can be managed properly. Management of finance is not although an easy job but implying proper guidance it could be made easy. Already the world is facing the recession, not a single country is left which is not engulfed by the daemon called recession but following few tips can still help your business accounts to glide through.

Tips for the Management of Business' Financial Accounts:

Few tips that can be adopted by the businesses in order to upgrade the financial status in this crucial period can be pointed as:

Accurate Selection of Accounting Software:

Requirements are changing at a very faster rate. In case of managing financial accounting in the business is not possible to bring a rapid growth with the earlier systems that were being used. Up gradation of the software is need for total automation. Newest software can only take care of the business finance, sorting various issues related to employee regarding individual accounts etc.

Selection of the Proper Credit Union:

Capital investment is greatly needed in for the growth and development of any organization. Finding credit union therefore, is a highly needed factor. A credit union is a cooperative financial institution that provides credits at reasonable rates and financial accounting services to its members. So, credit union is required for granting loans to the firms whenever necessary based on their requirements.

Managing the Cash Flow:

Cash flow statements should be very clear to the accountants and also to the higher officials. The monetary amount coming in and going out of the business should be clearly noted so that at the time of revising the financial status accountants will not have any difficulty. One can also indulge mobile payment systems to allow faster and easier payments acceptance.

Maintaining the General Ledger Accounts:

The general ledger shows the bifurcation of debit and credit accounts. The balancing of the accounts can easily be noticed. If the ledger is maintained effectively then ultimately it helps in drawing the annual budget in a correct manner.

Concentrate on Accounts Receivable:

The money that a customer owes to the business in return of the goods and services that has been received by the customer. For the payment purpose an invoice is generated and sent to the customers. Managing these monetary amounts is important to analyze the budget.

Lowering the Accounts Payable:

Accounts payable is the amount that the business owes to the suppliers for the goods or services it has already received. When the invoice received for making the payment, it is kept in the file. On making the payment the invoice is removed from the file. It should be lowered to a certain extent. Because if the debt will increase beyond limit it will directly hit the annual budget and which could be the cause of the demolition of the vast structure.

Calculation of the Capital versus Operational Costs:

The goal often is to lower down the capital costs in order to maintain the budgeting and manage the various costing. Knowledge of depreciation is important and that should be adjusted year to year. Outsourcing this task helps in a better way as it deals with costs so complications might arise maintaining it.

Explore Growth Areas:

It is not possible for a single department to measure everything at a right rate. Accounting management is a vast area to cope up with everything needs huge knowledge and manpower. Outsourcing your service as well as getting the service from other firms becomes more effective as well as it saves your business' productive time.

Hire Bookkeeper:

While hiring bookkeeper, make sure the person will not exploit the finance of the organization. Bookkeeping is a task where the finance has to be managed by the trusted individual; the whole business finance is revised through the bookkeeping services. Good bookkeeper can show a new direction to draw the business. So the bookkeeping is the most crucial service in accounting management.

Revising the Annual Budget:

It is just to revise various issues like the cost of different products or services, the ledger costing; the trial balance has to be maintained as it contributes a lot to the budgeting of the organization. For the ultimate growth of the business, the various financial tasks, which are to be sorted to maximize the profit rate and minimize the loss.

For the business growth and development from the accounting point of view, proper consultation is always advisable. It can act as a support for the financial growth undoubtedly and can thereby support the industrial growth and development.

Author is related with reputed offshore accounting services providing firm Aditech Accounting Services. Get detailed information about financial accounting services [http://www.aditechaccountingservices.com/services.html] and bookkeeping services at its official website aditechaccountingservices.com.

Why Financial Accounting is Important

The ownership and management of business is challenging, and keeping track of finances is one of the most obvious examples of those challenges. The specialized field that handles accounting for business is called financial accounting and provides individuals who are externally linked to that business with information on a company´s financial performance and position. This information is typically given to share or stockholders who want to piece together a value for that company based upon the information they have obtained.

It organizes the transactions of a company by writing down those transactions and creating a financial statement or financial report that summarizes the data in a balance sheet or income statement. These statements are then used by individuals externally to determine the value of a company. If the company is publicly traded, these financial statements will circulate wider, to customers, competitors and employees as well.

Management is given the task of spending business funds to help the business run economically and efficiently. Financial accounting statements can be used to assess management effectiveness by showing the spending of allotted resources and helping to assess whether management should be sent to work in another department or replaced altogether to increase the profitability of the company.

It's important to note that it provides information to individuals who are trying to determine what a company´s worth is and it does not report that value on its own. These statements are provided to individuals who are external to a company and can circulate broadly, even reaching competitors of that company and other sources.

The FASB, or Financial Accounting Standards Board, is responsible for creating a standardized system of rules called accounting standards for financial accounting in the United States. These standards are important for financial accounting statements because so many people use these statements in so many different ways. These standards are known as generally accepted accounting principles (GAAP). Companies in the U.S. who also trade stock publicly also comply with the Securities and Exchange Commission (SEC).

This is important to stockholders and shareholders who are interested in determining the value of a company they are part owners of. Keeping track of this data helps a company to assess the value of their management and the resources they have allotted them to make their company run better, and financial statements help to determine the effectiveness of management for that company.

Executive level pay is based upon company performance. If the performance of a company is not reported in a proper manner, executives make money that far exceeds what the business is capable of and creates a false picture of a company's performance. This false reporting causes the stock market to balloon by rewarding stock to companies who do not deserve it, and these methods have a bad effect on our economy. Business accounting that honor the GAAP (Generally Accepted Accounting Practices) creates a transparent persona, an air of trust and respect, from the users of their financial statements. Read more [http://www.bigarticlepool.com/articles/Why_Financial_Accounting_is_Important_8ea18c58-6a45-102c-8c43-000e0cc62f92.php].

Introduction to Financial Accounting and GAAP

Accounting, a.k.a. "The Language of Business", is a large and diverse topic. Subtopics include financial accounting, cost accounting, management accounting, internal auditing external auditing, international accounting, governmental and not-for-profit accounting and taxes. The subtopic that comprises the largest portion of an accountants academic program of study is financial accounting.

The purpose of financial accounting is basically to provide useful information to users who will use that information to make a decision, most commonly either an investment or a credit decision. To be useful information needs to be relevant and reliable. The most common means of conveying information to users is through the preparation of financial statements: 1. the income statement, 2. the balance sheet, 3. the statement of cash flows, and 4. the statement of shareholders' equity.

The income statement presents the profitability of company over a period of time. The balance sheet presents the assets, liabilities, and owners' equity at the end of the period of time used for the income statement. The statement of cash flows classifies all cash inflows and outflows during the time period into one of three categories: operating, investing, and financing. The statement of shareholders' equity shows how the shareholders' equity changed over the period.

Generally accepted accounting principles (GAAP) are a set of standards, methods, procedures, and guidelines companies follow in measuring and reporting financial information in the financial statements. GAAP comes from written sources as well as practices that have been used for a ling time that have become generally accepted. Although the Securities and Exchange Commission (SEC) has the legal authority to set accounting standards for companies, it has always delegated the majority of this responsibility to the accounting profession itself. The current accounting professional body that sets standards is known as the Financial Accounting Standards Board (FASB). The FASB issues standards called Statements of Financial Accounting Standards (SFAS). They can be found on the FASB web-site, http://www.fasb.org. As of May 2007 the FASB has issued 159 such statements.

All publicly traded companies listing their stocks on U.S. stock exchanges must have their financial statement audited by an external CPA firm that expresses an opinion as to whether the financial statements have been prepared in conformity with GAAP. The idea is to lend credibility to the financial statements by providing a third-party's verification that the
 statements are presented fairly in conformity with high quality standards, GAAP!

Recent accounting scandals (WorldCom, Enron, etc), however, have given the accounting profession somewhat of a black eye and have rekindled the debate over whether principles-based, or more recently termed, objectives-oriented, standards should be set forth as opposed to rules-based accounting standards. A principles-based approach to standard setting stresses professional judgment, as opposed to following a specific list of rules.

Dr. Kemerer is the director of the accounting program at Florida Memorial University located in Miami Florida. He has taught at the college level for over 20 years. He received his Ph.D. in Accounting from Virginia Tech in 1990 and is a Certified Public Accountant in Florida. Dr. Kemerer is also a Certified Management Accountant and is Certified in Financial Management.

Computerized Financial Accounting - Methods and Practices - Use of software in Accounting

Complete financial accounting course or tutorial covers a range of following topics. It is being evaluated that how computers have affected traditional accounting methods and practices.

    Financial Accounting with Double Entry Bookkeeping
    Principles of Accounting
    Basic Book of Accounting - Journal
    Accounting Ledger
    Accounting Sub Journals - Cash Cook
    Subsidiary Accounting Books
    Accounting Verification by Trial Balance
    Banking Transactions Bank Reconciliation Statement
    Depreciation
    Rectification Of Accounting Errors
    Balance Sheet and Profit and Loss Account
    Single Entry Bookkeeping Accounting System
    Non Profit Organization Accounting
    Capital and Revenue
    Reserves and Provisions

In a very short span of time, computer has grown from a scientific curiosity to an indispensable tool of modem society. There is hardly any scientific/technical or business activity which is not in one way or the other, affected by modern data processing techniques.

The human mind can handle only a limited number of things at a time. The digital computer, on the other hand, can be programmed to compare, measure, calculate and evaluate thousands of readings in an extremely short period of time.

The computer industry has become the fastest growing industry these days. The sale of mainframe computers is increasing day by day. The computer industry has been further pushed up by the introduction of mini computer and micro computers which are small, cheap, reliable and very light. These are being routinely used for process control, production testing, scientific instrument recording, in store check out systems, in automobile test and evaluating systems, and medical monitoring etc.

Computers are now being used extensively in office administration to perform the routine clerical work. Today, most large and medium sized organizations are almost totally dependent on their computers. Routine uses of computers are given below:

(i) Accounting, Billing, Inventory Control Software with MIS, CRM

Computers are extensively used in accounting and there are multitude of computer software for Accounting, MIS, CRM. HiTech Financial Accounting is one such software which has been customized for users in many segments in business and services.

(ii) Payroll and personnel records.

Payroll accounting was the first commercial area to become widely computerized. The calculation of wages or salaries involves a number of variables which relate to the personal details of each employee, such as gross pay or rate for the job, individual deductions, tax liabilities of the employees and so on. These facts can be retained in the computers and processed every month of produce pay slips for the employees.

(iii) Stock control

The computer helps to exercise the type of stock control needed by the organization. It upto dates the sales and purchases records, determines optimum re-order levels for different items and prints out the stock lists when desired. The system can be so designed that it triggers orders when stock level reaches order point for various material items; tests those item which are slow moving or gives list for over stock items.

(iv) Sale accounts records

Programming can be done for any sales accounting system. The computer will pin point defaulting debtors, determine the right limit for credit for each debtor and maintain stores ledger.

(v) Costing and budgetary control

Costing and budgetary control can be affected through the computer, the computer will point out the variations from the planned performance.

(v) Production control

The computer also helps greatly in production planning and control. It is possible that scheduling of the work may become necessary due to break downs etc. A new critical path may have to be worked out. A critical path is the shortest path to be followed in production to achieve production objectives. The computer helps the management lay down this new critical path.
Advantages and disadvantages of a computer

A computer is surely advantageous because of the high speed of operation and greater accuracy it provides, savings effected by better managerial control, savings in labor because it is fully automatic and finally because of its flexibility in use. However, there is a considerable capital outlay with difficulty of obtaining experienced analysts and programmers, break down and maintenance troubles and finally fear of obsolescence due to rapid development of computers.

Type of other applications in relation to accounting system

WORD PROCESSOR

It is a software package to help in text processing. Words are processed. Processing includes insertion, deletion changing, moving words, paragraphs etc. Word processing is the preparation of type scripts, using computing facilities for the storage and manipulation of text. For example, word processor has ability to merge name and addresses with standard text so as to give impression that the latter is personalized even in case of circular letter.

HiTech Financial Accounting has got features so that you can export its reports to Microsoft Word, a word processing and Mail Merge Program. You can also write letters to various parties and store the details in the program database.

DATA BASE

It is simple collections of information (data) on a particular subject. Data base file allows you to manipulate the data in desired form. So, data base allows us to work on facts and figures to store and manipulate that data in any desired way. For example, from the same basic information trial balance is prepared; trading and profit and loss account may be prepared; list of debtors and creditors may be prepared; purchases and sales forecast may be made and so on. So, an efficient data-base management is needed to provide flexibility in uses of information.
HiTech Financial Accounting uses MS Access and MS SQL server databases for robust database connectivity.

SPREAD SHEET

It is one of the software programs which have increased the utility of computer for accounting purposes. Spread sheet programs help you to draw vertical as well as horizontal columns on a large sized paper. Each .column's length and breadth can be adjusted according to suitability. Even when columns are once drawn subsequently these can be altered, increased or decreased additional columns can be inserted, existing columns can be deleted. It is very useful for businessmen and professionals. It enables us to study multidimensional data at one sheet and helps in arriving at logical decisions. For example, if profit and loss account has been prepared for the year 1989 and you want a comparison with 1987 figures and 1990 forecast then spread sheet shall enable you to provide two additional columns on each side for inserting 1987 actual figures and 1990 forecast estimates.

Financial Accounting Services - Compliance with Standards

Financial accounting is a significant branch of every company. It is responsible for the generation of financial statements that are required by external users such as governments, revenue authorities, shareholders, potential investors, debtors, creditors and general public. The statements are produced using detailed accounting information. This information has to be prepared in total compliance with various accounting standards and conventions. This being a time-consuming and expensive process, numerous businesses are now opting for financial accounting services provided by third parties. These are organizations that own fully established data entry centers in the U.S and oversees.

Their line of business is guided by the International Financial Reporting Standards and International Accounting Standards. Every person who starts a small company is not knowledgeable about keeping accounts. The truth is that most people do not distinguish between financial and managerial accounting. Do you belong in this category too? The best thing that you can do to boost your business growth is to order financial accounting services from outside. This does not mean that you cannot continue using an internal accountant. It is just wiser to hire external service providers to reduce operational costs.

If your business is just starting up you may not be able to employ more than one finance officer to supervise how the money flows in and out of your company. Even though one employee could work late to finish financial, accounting and bookkeeping tasks, he or she could demand payments for every extra hour worked. As your business grows you might find that an internal financial bookkeeper is beginning to pile work as it might be too much for one person. Piled work is never completed effectively because it is rushed and given less thought. To avoid unnecessary errors that might be too expensive for your venture you should use financial accounting services from an external contractor.

The providers of these Financial accounting services are large accounting firms although there are also many work-from-home and freelance accountants who can be hired on an hourly or fixed term basis. Since the accounting firms are usually registered you can hold them responsible for incorrect results, illegal sharing of personal information and other things. Their business premises are easier to locate anywhere in the United States than individual freelancers who operate without registered home businesses. Many people want to order financial accounting services but they are afraid of losing their clients to them. Do you also fear the same thing? If you can take adequate time to chose an appropriate outsourcing accounting firm you cannot lose a single client.

Important Notes for Financial Accounting Services

Financial accounting is providing information such as balance sheet, profit and loss accounts for taking financial decision. It could be produced in front of the external agencies like government department, income tax authorities, shareholders, as well as creditors who analyze the financial strengths and weaknesses of a company. Financial accounting services include only the monetary aspects of the business. In the company's financial year end financial accounting is handled by certified accountants who produce two fundamental financial reports such as the balance sheet as well as the profit and loss statements.

• Experts to work for you

Finance department is the pillar for every firm. Therefore, financial accounting should be supervised by skilled professionals who help in enhancing overall progress of the business. In a business, financial understanding is essential to administer all types of expenses including sales and purchases, fixed and overhead expenses, etc. The expenses need to be noted down in the accounting ledger to verify the annual budget. These transactions are later revised at the financial year end, in order to check the cash flow of your business.

Financial accounting services keep a record of the financial transactions systematically for any business and make it easier to take correct financial judgments. Maintaining proper financial records, it is helpful in yearly transactions as well as report preparations.

• Outsource for efficient results

Outsource your financial services to the most consistent service provider who would ensure efficient running of your business, and help you to save your time and concentrate on other key issues of your business.

It is essential to have proficient financial accounting services work for you as a single mistake can cost heavily into major losses to your company. Having an experienced accounting service work for your firm is essential for efficient financial and accounting management. Providing the financial details of your organization and having skilled work force these companies are capable of preparing detailed reports such as balance sheets, as well as profit and loss account, etc.

Financial Accounting Versus Cost Accounting

Before we go to differentiate Financial & Cost Accounting we must have knowledge what these both terms really are. As we define both terms these would automatically be differentiated.

Financial Accounting:

Financial Accounting is a systematical way to prepare the financial statements of an organization is order to get the true and fair view profit or loss. These financial statements are organized for decision making, stockholders, Banker, Supplier, Shareholders, Government Agencies, and other stakeholders. The basic requirement to prepare financial statement is to examine and reduce the dead expenses by measuring the expenses and income status and to reporting the result to interested users. These statements are organized for outsiders who do not take part in day to day organizational activities.

Simply we can say, "Financial accounting is the process which includes recording, interpreting & summarizing date taken from financial records of an organization and bring it out in an annual report for the benefit of people outside the organization".

In depth financial accounting contains some principles, Concepts & Equation.

Financial accountants organize financial statements based on Accounting Principles which are generally accepted by a specific country. Financial statements must be prepared according to the (I FRS) International Financial Reporting Standards.

Accounting Equation: (ASSETS = LIABILITIES + OWNER'S EQUITY).

Accounting Cycle:

1. Voucher.
2. General Journal.
3. General Ledger.
4. Cash Book.
5. Trail Balance.
6. Trading profit & Loss Account.
7. Balance Sheet. Cash Flow Statement.

First of all the transaction occurs and noted in the form called Voucher. All transactions are available in vouchers. Then one specific form is created called General Journal. All transaction recorded in one form. The next step is Called Posting in which all separate heads/accounting recorded separately in different form/accounts called General Ledger. Cash Book is maintained to record the payments and recipes or organization. By the help of General Ledger the Trail Balance prepared which provides the items of Trading, profit & Loss account and Balance Sheet which shows the financial position and the health of the Organization. And lastly Cash Flow Statement is prepared to drive the accrual inflow & outflow of cash.

Cost Accounting:

Cost accounting ascertains budget and actual cost of production, operations, departments, process and the analysis of variance. Cost accounting is used to support decision-making to reduce cost of organization and improve its profitability. Cost accounting does not require standards as (GAAP) Generally Accepted Accounting Principles, as its primary use is for internal management, rather than outside people. Some of managerial accounting approaches are mentioned as under;

• Managerial Costing.
• Activity based Costing.
• Standard Cost Accounting.
• Resource Consumption Accounting.

Three Classical Cost Elements:

• Raw Material.
• Labor.
• Factory Over Head/Indirect Expenses.

Cost Accounting is being used to help the managers to understand & reduce the running cost of an Organization. Most of Cost varied with the rate of production which is called "Variable Cost" like money spent on labor, power to run a factory, direct material etc. Unlikely variable cost, some costs remain the same even while busy period or during null production. These costs are call "Fixed Cost" like Depreciation on Assets, Rent of building etc.

In cost accounting some statements are prepare. Majors are Income Statement, Cost of Goods Sold Statement, and Cost of Production Report.

Income Statement:

Income statement is prepared to drive the net income/profit of the organization. In the process all direct Expenses related to purchase of Goods/material are less from Sale and the retained amount is called Gross Profit. Then all indirect expenses related to sales, Admin & Financial Charges are deducted from (GP) Gross Profit, retained amount after deduction is called (NP) Net Profit/income.

(CGS) Cost of Goods Sold Statement:

Cost of Goods sold statement is prepared to drive the total cost which is spent on the purchasing to sell the produced Goods. In the preparation process first of all the Closing Martial of last year is added in purchase of Martial, which is called "Total Material Available for Use" and Material Used is deducted from it. The remaining amount is called "Cost of Material Consumed". Then the cost of Labor and (FOH) Factory Overhead added in cost of material consumed. The total of this is called "Total Factory Cost" after that Opening stock of work in process is added and closing stock of work in process is deducted from Total Factory Cost. The amount which drives after this is called "Cost of Goods Manufactured". Lastly the Opening Stock of Finished Goods is added and Closing Stock of Finished Goods is deducted from Cost of Goods Manufacture and the Answering amount is Called "(CGS) Cost of Goods Sold"

5 Things You Will Be Studying in Financial Accounting

If you have recently been accepted into any institution for an accounting course, chances are that one of the very first courses you will have to take is on financial accounting. The term 'financial accounting' sounds very impressive, but it gives no clues on what it is all about. And it is from such a background that you could find yourself getting online, and looking for information as to what financial accounting is all about. It is exactly that type of information that we now proceed to give you. That we do not by simply telling you what financial accounting is (different authorities posit different definitions); but by going with you on a journey in which we will explore some of the things you will be studying in the financial accounting module.

Now one of the things you will definitely be learning in financial-accounting is the double-entry accounting concept. This can be confusing at first, but you will soon get a hang of it, and actually get to love it, because it feels like a game once you understand the rules. In this area, you will be taught about the idea of a 'credit' and 'debit' in accounting, and you will come to learn that in the accounting system, every transaction generates a debit (or a set of debits) in some account(s), and that every transaction also generates a credit (or a series of credits) in some account(s). It seems complex when explained in this way, but when your instructors show you by way of example, you will find it all very easy.

To help you make sense of double-entry accounting, the second thing you will be taught in financial accounting is the accounting equation. It is an equation that is accepted globally, and it simply says that the total value of an entity's assets is equal to the total amount of the same organizations capital plus liabilities. If you are still unfamiliar with these things, you will be taught what an asset is, what a liability is, and what capital, in the accounting context, refers to.

The third thing you will definitely be taught in financial-accounting is cash-flow management. This will start with an introduction into the workings of the cash-book, before proceeding deeper into the mechanics that go into control of the money that gets into an organization's tills, and money that gets out of the same tills.

The fourth thing that you will definitely be taught, in financial accounting, is that which is 'accounting for expenses' and it is here that you will be introduced into what is referred to as the petty cash book - which is quite distinct from the organization's main cash book.

In a modern financial-accounting course, you will also get to learn something about the computerization of accounts. The whole accounting course will have a distinct module on this, of course, but many curriculum planners find it necessary to give students in financial accounting ideas on how the various 'books' they have been studying about can be computerized. How the various accounts that students encounter in financial-accounting (from the balance sheet to the profit and loss account and onto the cash books we have talked about) can be presented in spreadsheets is explored here. A student will also be taught how to interact with the various accounting software programs, and how the concepts they will have learnt in financial accounting play out when applied in the accounting software.

Why Financial Accounting is Crucial For Every Business?

Financial accounting is important part for every type of business like small, mid and large business. Financial accounting is the field of accountancy concerned with the preparation of financial statements for pronouncement makers, such as stockholders, suppliers, banks, employees, government agencies, owners, and other stakeholders. accounting may be the single most critical data method your company will require. Financial accounting aims to generate two basic financial reports, the balance sheet along with the earnings and loss statements. A predictable software system uses a ledger of accounts to categorize financial activities of one's corporation.

Financial accounting is used to arrange accounting information for people outside the organization or not concerned in the day to day running of the company. Management accounting provides accounting information to assist managers make decisions to handle the business. In short, Accounting is the procedure of abbreviation financial data in use from an organization's accounting records and publishing in the form of annual or monthly quarterly reports for the advantage of people outside the organization.

Accounting Information of employees which play an essential responsibility has to be managed in an appropriate way so that at the year end reports can be generated effortlessly without any hassles. It is very essential to set up appropriate business financial strategies which can be followed so that the business can eventually meet the schedule. The different tips that will assist you to flow the cash in the accurate way and will assist you to understand the need of the accurate arrangement of the different business financial accounting can be listed as follows:

• Check Financial Transactions
• Revising Billing Statements
• Review the Invoices
• Maintaining Transparency
• Updating with Taxation Rules
• Follow GAAP for Accounting Management
• Maintain Simplicity in your Accounting Records

These are certain principles that the accountant or any other accounting services provider outsourcing company should pursue in order to run the business fairly and to meet the financial require of the organization. A methodical accounting procedure helps the business to develop and thereby meeting the estimated profit.

3 Tips to Formulate Best Financial Accounting Services Provider Team For Excellent Services

"A business is known by its employees", a very well known proverb, which in real life is hardly considered. Everyone look for a good business without considering the inner capabilities. It is a real careless attitude among people. During a financial crisis or so the business gets affected because of its fellow workers who run the business, but instead of understanding the real cause we unnecessarily blame the business. Team spirit is something which should be nourished well so that it can ultimately benefit the organization.

Business accounting services is something which should be taken care especially. Business finance that supports any big or small organization has to be managed well. That means, the group of people who are planning to manage the finance must be knowledgeable enough and should be able to meet the financial need of the organization. If the financial management services provider is stronger enough then it will make the financial standard of the business stronger. A business with a strong financial support always reaches high.

Role of Financial Accounting Services in Organization:

Finance is a key term used now and then. To manage the finance and to use it in a profitable manner is a real difficult job. In the organization, finance is used for all kind of expenses considering the sales, purchases that occur regularly. In order to keep a check on the annual budget, the expenses has to be tracked sequentially in the accounting ledger. These transactions are then revised at the end of the year to check out the cash flow of the business.

Business financial accounting services management needs skilled person to take care of it. Accounting management is the most complex amongst the rest. A minute mistake can result into the demolition of large infrastructure. The finance is that particular entity which helps in running the business. Generally in an organization the finance department is managed by a huge team and these financial accounting services management team supported by the organizations are trained sporadically for latest updates.

3 Tips to Formulate the Best Accounting Team:

Now, while you know the importance of the accountants and finance, to manage your business finance is your headache but definitely there are few tips that can guide you the best, to formulate the financial accounting services provider team. The various tips are as follows:

* Selection of Knowledgeable Individuals:

It is important that you should not select a layman for your business activities especially for the management of small business accounting services. Knowing the importance of this specific field try to recruit someone who has got immense experience in the field of accountancy or who can manage the finance well. If you think that accounting management is becoming too complex for your organization and wasting your productive time then you can always hire an accounting services provider firm. These firms work after getting the financial details of your organization and work dedicatedly by sharing their expertise in the respective field.

* Transparency among Team Members:

Coordination is very important among the team members. Financial activities are composed of managing the daily financial transactions, generating payroll, recruitment process etc. All these are managed by different individuals of the same department but each and every works are interrelated. Thus, people should have the idea of each and everyone's work to better schedule the work culture and manage the work flow. So train the team members for their respective work properly.

* Implementation of Intellect:

Knowledge is measured through its implementation. Simply recruiting knowledgeable employees would not make any sense till they implement their intelligence. The financial accounting services providers should be quick enough for taking important decisions which could benefit the firm in near future. They should be efficient enough to change the financial strategies and policies based on statistical analysis of the firm's expenses. Test the knowledge of individuals separately before forming the group.

These are three key points which will help you in formulating the team for providing the business accounting services in an efficient way. The finance should be managed properly to enjoy its benefits therefore think twice before choosing a single pathway for tackling your organization's financial accounting services.

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The Unresolved Flaws in Financial Accounting

The users of accounting information include company owners, managers, investors, creditors, and government agencies. It is generally acknowledged that most financial reporting is "primarily externally oriented" and most of the users are non accountants who get frustrated trying to understand the statements. Since they are not part of the management team, they more or less are looking from the outside in.

Despite the many accounting associations from the Accounting Principles Board to the American Institute of Certified Public Accountants to the Financial Accounting Association that established the Financial Accounting Standards Board, there continues to be alternative ways of reporting which adds to the confusion and limitations of financial reporting.

Recognizing and Reporting Methods:

FIFO vs. LIFO:

FIFO and LIFO are two of the major methods of reporting transactions. Because these are alternative methods left to the discretion of the entities, two similar companies in the same industry could report the same transactions for similar goods and arrive at two separate conclusions. The FIFO method assumes that earliest goods purchased are the first to be sold. The LIFO method assumes that the latest goods purchased are the first to be sold "as a result the first cost assigned to ending inventory are the costs of the beginning inventory." So goods purchased in September can be included in a prior month's cost of goods sold. This method, though acceptable alters final reporting for better or for worse.

ACCRUAL vs. CASH:

Under current generally accepted accounting principles, financial accounting is backward looking. By reporting past transactions that rely on accrual accounting to conform to the matching principle, financial statements do not account for how much of the outstanding debit accrued under accounts receivable will actually be collected. This could mislead non accountants into over estimating assets in the immediate period after the release of a report because the adjustments due to non collection are done much later. In this scenario, a report released at the end of the year may project that a firm has $10,000.00 in accounts receivable. That projects $10,000.00 more in the asset column of the firm. This may give a more positive outlook when in actuality the firm may end up recouping only $3,000.00 of its account receivable. An investor attracted to the company on the basis of its strong outlook may be disappointed to find out later that in trying to collect on the accounts receivable only one-third was actually obtained. This weakness was the reason of the now defunct cash basis versus the current accrual basis. In the cash basis accounting, revenue or expenses were recorded when actual units of measurement (money) exchanged hands.

SUBJECTIVE vs. OBJECTIVE REPORTING:

A greater existing flaw in financial accounting is the subjective latitude given to accountants preparing financial statements to use their "professional" judgment. This flaw gives some accountants the latitude to manipulate reports as we witnessed in the Enron debacle of 2001. Business transactions between entities, people or business, are concrete events that are recorded. In the Unites States for example, the unit for measuring these events is the dollar. As a result, there should be no basis subjective judgment when reporting an empirical event or transaction. It is odd that different accountants should reach different acceptable conclusions for the same event. This creates room for more questions and further skepticism from the public. As a quantifiable unit of measurement, a dollar amount should always be the same no matter how it is reported.

Report of Foreign Bank and Financial Accounts (FBAR) Questions Answered

The Bank Secrecy Act demands that anyone with a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, reports to the IRS by filling Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).

Why File FBAR?

Some people use foreign financial accounts to get around United States law, and the FBARs areused to identify such persons for the reason that foreign financial institutions may not be subject to the same reporting requirements as domestic financial institutions. FBARs are used by investigators to help discover any income maintained or generated abroad that isn't reported.

The FBAR was amended and final regulations published on February 24, 2011 by the Treasury Department and they came into effect a month later, on March 28, 2011. The regulations apply to FBARs that were required to be filed with respect to not only foreign financial accounts maintained in 2010 calendar year but also in respect to all subsequent years. The FBAR form and instruction has since been amended to reflect the revisions made by the final regulations

To help provide administrative reprieve for specific individuals with signature authority over but no financial interest in foreign financial accounts, the Financial Crimes Enforcement Network (FinCEN) issued a notice on May 31, 2011 that was later revised on June 6, 2011.

Who Should File FBAR?

Employees or officers of entities under 31 CFR § 1010.350(f)(2)(i)-(v) who had signature or other authority over and no financial interest in foreign financial accounts of controlled persons of that entity. Also, employees or officer of controlled individuals of entities under 31 CFR § 1010.350(f)(2)(i)-(v) who have signatures or other form of authority over and without financial concern in foreign financial accounts of the entities, the controlled persons, or other controlled persons of the entities, had The deadline of reporting signature authority extended to June 30, 2012. A controlled person is a United States or foreign entity more than 50 percent owned (directly or indirectly) by an entity under 31 CFR § 1010.350(f)(2)(i)-(v).

The deadline of filing the FBAR for individuals with signature authority but without financial interest whose filing requirements were properly deferred under Notice 2009-62 or Notice 2010-23, were notified on June 16, 2011 that their deadline for filing the FBAR had been extended to November 1, 2011. The extension was only applicable to the 2009 and earlier calendar years.

Another notice was issued by FinCEN on June 17, 2011 to June 30, 2012. This was aimed to facilitate more precise conformity with FBAR filing requirements. The June notice was aimed at providing administrative relief for certain officers or employees of venture advisors registered with the Securities and Exchange Commission with no financial interest in certain foreign financial accounts but with signatures or other form of authority.

To file an FBAR, one must be a United States Person with a financial interest in or signature authority over at least one financial account situated outside the U.S. Also, the cumulative value of all foreign financial accounts ought to surpass $10,000 at any time for the period of the calendar year.

In this case, a U.S. person can be U.S. citizens, populace, body, including but not limited to joint venture, corporations, or limited liability companies created or organized in the United States or under the laws of the United States.

Are There Any Exemptions?

There are some filing exceptions to the FBAR reporting, they are available in the FBAR instructions. The following persons in the United State or foreign accounts are exempted from filing the FBAR. The FBAR instructions contain information on the eligibility for an exception as well as exception requirements.

    A joint FBAR that include United States persons.
    International financial institution that own foreign financial accounts
    Beneficiaries and owners of the IRA
    Nostro or Correspondent accounts
    Certain foreign financial accounts that are jointly owned by spouses
    Foreign financial accounts maintained on a United States military banking facility.
    Some individuals without financial interest in a foreign account but have signature authority
    Tax-qualified retirement plans beneficiaries and participants
    Government-entity owned financial accounts
    Trust beneficiaries.

Even though foreign accounts may not produce taxable income, persons with such accounts may still have a reporting obligation. An account holder's obligation can be confirmed by checking the appropriate block on FBAR- linked federal tax return or information return questions like the one indicated on Schedule B of Form 1040, the "Other Information" section of Form 1041, Schedule B of Form 1065, and Schedule N of Form 1120) and filing the FBAR.

Are There Any Differences Between Filing FBAR and Federal Returns?

The FBAR is filed separately from the filer's federal income tax return. The IRS may grant an extension to file federal income tax returns but that doesn't affect the due date of filing an FBAR. The filing of the FBAR is not extendable as it must be received by June 30, of the year following the calendar year being reported. One can file by mailing it to either the United States Department of the Treasury or by express mailing to the IRS Enterprise Computing Center located on 985 Michigan Avenue

Civil penalties, criminal penalties, or both may be subjected to account holders who fail to conform to the FBAR reporting requirements.

Can FBAR Forms Be Filed Electronically?

E-filing is a quicker and efficient way to file FBAR. An electronic filing system that accepts the FBAR forms was announced by FinCEN on July 18, 2011. Online filers are supposed to receive acknowledgement from the system after each submission.

How Do I Access FBAR Customer Service?

More information and help on the filing of the FBAR can be accessed from the IRS website or any of the 400 IRS centers. The FBAR form is also available to download from the Financial Crimes Enforcement website.

Management and Financial Accounting

Accounting is usually seen as having two distinct strands, Management and Financial accounting. Management accounting, which seeks to meet the needs of managers and Financial accounting, which seeks to meet the accounting needs of all of the other users. The differences between the two types of accounting reflect the different user groups that they address. Briefly, the major differences are as follows:

    Nature of the reports produced. Financial accounting reports tend to be general purpose. That is, they contain financial information that will be useful for a broad range of users and decisions rather than being specifically designed for the needs of a particular group or set of decisions. Management accounting reports, on the other hand, are often for a specific purpose. They are designed either with a particular decision in mind or for a particular manager.

    Level of detail. Financial reports provide users with a broad overview of the performance and position of the business for a period. As a result, information is aggregated and detail is often lost. Management accounting reports, however, often provide managers with considerable detail to help them with a particular operational decision.

    Regulations. Financial reports, for many businesses, are subject to accounting regulations that try to ensure they are produced with standard content and in a standard format. Law and accounting rule setters impose these regulations. Since management accounting reports are for internal use only, there are no regulations from external sources concerning the form and content of the reports. They can be designed to meet the needs of particular managers.

    Reporting interval. For most businesses, financial accounting reports are produced on an annual basis, though many large businesses produce half-yearly reports and a few produce quarterly ones. Management accounting reports may be produced as frequently as required by managers. In many businesses, managers are provided with certain reports on a monthly, weekly or even daily basis, which allows them to check progress frequently. In addition, special-purpose reports will be prepared when required (for example, to evaluate a proposal to purchase a piece of machinery).

    Time horizon. Financial reports reflect the performance and position of the business for the past period. In essence, they are backward looking. Management accounting reports, on the other hand, often provide information concerning future performance as well as past performance. It is an oversimplification, however, to suggest that financial accounting reports never incorporate expectations concerning the future. Occasionally, businesses will release projected information to other users in an attempt to raise capital or to fight off unwanted takeover bids.

    Range and quality of information. Financial accounting reports concentrate on information that can be quantified in monetary terms. Management accounting also produces such reports, but is also more likely to produce reports that contain information of a non-financial nature such as measures of physical quantities of inventories (stocks)

Managerial Accounting Vs Financial Accounting

Have you ever wondered what the differences are between managerial and financial accounting? Well, throughout this article I will be contrasting the differences between the two. Accounting includes areas such as tax, audit, cost, and information systems. However, the only area in accounting that relates to this article is cost, because cost is a subset of managerial accounting. Some of the major differences between managerial and financial accounting include but aren't limited to GAAP, internal/external reporting, internal/external focus, and unit focus. There are many other topics that I could use for this essay, however I feel like these certain topics help describe the difference the best.

The first topic that I would like to talk about is the difference between managerial and financial accounting through GAAP (Generally Accepted Accounting Principles). A firm must follow GAAP down to the tee, however with managerial accounting there are ways around it, because managerial accounting doesn't have to worry about following GAAP standards. One of the main points in managerial accounting is cost accounting, and the point of cost accounting is to help decision-making, budgeting, and also cost analysis. In order to effectively cost a product there are many different formulas that must be followed which don't need to follow GAAP standards, however when the information is then transferred to the financial side of the firm, then all the GAAP principles must be followed. The number one goal of financial accounting is to have accurate financial statements so that the public, or the shareholders can continue or walk away from their investments. Also, in order to meet the SEC requirements a firm must follow all of GAAP principles.

Not only does managerial and financial accounting follow different principles, but they also have different ways of reporting their information. Managerial accounting focuses more on reporting the information to an organization in the company that will help with planning and organizing for the future. Also, each month's information is saved, and then they will use that information to predict what will happen in the future, so all of the information collected is very useful. However, financial accounting reports information to a different group of people. The information is gathered for the month or the quarter, and then sent to the CEO, or the CFO. The next step would be for the CEO or CFO to report the information to share holders or any person who makes investments in the company. Even though there are major differences between the two each are equally as important.

Next, there is a major difference in the overall focus of the two different types of accounting. The managerial side of the firm will focus on projections for the future, because all of the information that is collected throughout the months and years will be useful in predicting what will happen in the future. However, financial accounting's only focus is to ensure that the financial statements are correct at the end of the period. Also, financial accounting is required to make sure the ledger and the journal accounts are accurate and up to date.

Not only is there a difference in the overall focus of managerial and financial accounting, but the way in which each side expresses dollars in units. Managerial accounting focuses on unit costs, which are associated with Direct Material, Direct Labor, and Overhead. These are the three components, which make up costing a product. In order to successfully cost a product, it is important to include these three components into your overall product cost. So, managerial accounting focuses on mainly how much money are each unit worth rather than the overall price that the product sells for. However, on the other side of the spectrum in financial accounting the focus is on monetary units. Financial accounting is not worried about how much each unit costs, but care more about the sales price of each object being sold.

Differences Between Management and Financial Accounting

Financial and management accounting look at a business using different perspectives. Management accounting, also known as cost accounting, focuses in the internal needs of a company, while financial accounting concentrates on outside users of information. Financial statements compilation is associated with financial accounting. Budgets and cost variances relate to management accounting

Focus of Attention

Management accountants are concerned with planning and controlling operations, focusing on details, such as material costs. The more complex an operation is, the more likely it is to have more accountants dedicated to management needs, such as budgeting, and strategic planning.

Financial reports represent a business as a whole, while managerial accounting is often more goal-oriented and more specific to an area of a business. For example, a manager may ask accounting to give him a report showing sales numbers for the past two years. He is interested in only a part of the big picture.

Past versus Future

Financial accounting is concerned with the past, while management accounting deals with the future. Financial accountants want to make sure that historical data is compiled properly. They don't care if expenses are above budget or about cost variances because they usually don't provide budget information to outsiders. Instead, they focus on compiling data properly, following GAAP- Generally Accepted Accounting Principles.

Different Needs

Another area where financial and management accounting differ is that financial accountants need to be nimble enough to provide internal reports on as-needed-basis as well as periodic statements. It's common for accountants to run queries or setup reports without much lead-time. The point is to get the information to management fast. This is not the case with financial accounting, where accountants want to be precise and careful because reports go to users outside the business, such as investors or creditors. Financial reporting usually takes time and it is a planned event.

Accounting Systems

Generally in computerized accounting, the cost accounting system interfaces with the financial accounting system, feeding into specific accounts, such as inventories and cost of good sold. The company uses the cost system in its daily activities to control its processes and be able to assign costs to each part manufactured. Financial accounting doesn't need to know costs of manufactured part A versus part B -- these are particular concerns of management accounting only. Often, once a week or a month the controller runs an interface where information is transferred to certain accounts in the general ledger.