What is accountancy?
Accountancy is the process of managing the income and expenses of a business
The process of recording and summarizing financial transactions is known as 'bookkeeping'. When the data is produced in reports for the use of individuals or companies outside the organization, the process is called 'financial accounting'.
It refers to the process of measuring, summarizing, and communicating the financial information produced by bookkeeping to classify and explain account information to relevant parties such as shareholders and managers.
The use of this information also makes it possible to forecast future financial developments, analyses different areas of the business and evaluate business potential.
Reports in accounting
Three reports are typically generated in financial accounting and cover a specific, predetermined accounting period:
Balance sheet:summarises the firm’s assets and liabilities at a given point in time - usually at the end of an accounting period. This report provides a clear idea of the company’s financial standing.
Income statement: reports the firm’s gross proceeds, expenses, and profit or loss. This report addresses the income and expenses that are produced both by regular operating activities, or by ‘non-operating’ activities - income or expenses that are not directly produced by the business. This is probably the most important of the three types of accounting reports, as it is commonly used by management to help determine financial standing and decision-making.
Statement of cash flows: analyses the flow of cash into and out of the business. This report deals only with the cash that moves in and out of the company through various business activities. It also includes income and loss from any investments made in the company name. Keep in mind that ‘cash’ also includes credit payments after the payment is completed.
The creation of these reports typically occurs monthly and is used for internal planning and decision-making. This is known as 'management accounting'.
The aim is to provide managers with reliable information regarding the costs of operations and on standards with which those costs can be compared in order to assist with budgeting.
An automated accounting system such as I allows reports to be generated at any time depending on your business needs. Because expenses and income are balanced and updated immediately after they are entered, the balance sheet and profit & loss reports are ready when you need them. Use them as a tool to determine growth as well as the current financial standing of your business.