Financial Accounting

financial accounting

Internal financial accounting

Within the business it is important to maintain correct and up to date records for the following reasons:

It is necessary by the Revenue commissioners. Tax compliance is mandatory so maintenance of proper books and records are essential to make sure correct reporting of income and expenditure and the timely and correct return of payroll and VAT returns.

one. Tax compliance

two. Measuring performance

The prime users of financial accounting information about a business must be those who manage the business on a day to day basis. Furthermore, every business ought to have a business plan and a resultant annual budget to measure actual performance against. Information about sales revenue and gross profit, together with levels of expenditure on overhead is critical to the operation of the business. Operational decisions must be made constantly and these can be dangerously wrong if made on the basis of inaccurate or obsolete information.
financial accounting

Business designs are not for loan applications or grant claims. The business plan is of coursework an important requirement for obtaining outside support but if it is not a actual plan for a actual business then it is a recipe for catastrophe. The elderly adage states that in case you fail to plan you plan to fail. That can be updated to state that in case you fail to plan honestly, exactly and realistically you will plan to fail spectacularly, disastrously and financially. Basically put, when you prepare your preliminary plan you require feedback from your accounts technique to measure your business performance against the plan, so that early corrective action can be taken. When you subsequently prepare your annual budgets past performance measured by your accounts technique forms the basis for future projections.

three. Planning and budgeting

For outside users , financial accounting and reporting is of extreme importance:

Outside financial accounting

Your accounts give a clear picture of the financial standing of the business to existing and potential investors, helping them in deciding whether or not to invest. Financial accounting also gives you up to date information for existing investors about the future of their investment.
financial accounting

one. Existing (include yourself) and potential investors

two. Banks

Financial accounting is necessary by banks to support loan applications and existing borrowing facilities including overdrafts.

Suppliers often take decisions about extending credit to companies based on information extracted from accounts. Also customers, PLC's or huge multinationals often check the financial status of potential providers of goods and services before awarding contracts. The absence of up to date financial accounting statements to demonstrate capability to fulfil contracts can be expensive.

three. Suppliers and Customers

A current tax clearance certificate is necessary by semi-state and state companies as well as local and central government departments prior to awarding contracts. There's also an increasing number of private sector companies who are insisting on tax clearance as a prerequisite to trade. A tax clearance certificate can only be obtained from the Revenue Commissioners if all taxes are paid up to date and all returns made. Needless to say, having correct and up to date accounts is necessary to accomplish this.

four. Tax Clearance

financial accounting