Accountancy

Accountancy (profession) or accounting (methodology) is the measurement, disclosure or provision of assurance about financial information primarily used by managers, investors, tax authorities and other decision makers to make resource allocation decisions within companies, organizations, and public agencies. Accounting is the art of measuring, communicating and interpreting financial activity.

Financial accounting is one branch of accounting and historically has involved processes by which financial information about a business is recorded, classified, summarized, interpreted, and communicated; for public companies, this information is generally publicly-accessible. By contrast management accounting information is used within an organization and is usually confidential and accessible only to a small group, mostly decision-makers. Tax Accounting is the accounting needed to comply with jurisdictional tax regulations.

Auditing is a related but separate discipline, with two sub-disciplines: internal auditing and external auditing. External auditing is the process whereby an independent auditor examines an organization's financial statements and accounting records in order to express an opinion as to the truth and fairness of the statements and the accountant's adherence to Generally Accepted Accounting Principles (GAAP), or International Financial Reporting Standards (IFRS), in all material respects. Internal auditing aims at providing information for management usage, and is typically carried out by auditors employed by the company, and sometimes by external service providers.

Accounting/accountancy attempts to create accurate financial reports that are useful to managers, regulators, and other stakeholders such as shareholders, creditors, or owners. The day-to-day record-keeping involved in this process is known as bookkeeping.


Luca Pacioli and the Birth of Modern Accountancy

The first book on accounting was written by a Croatian merchant Benedetto Cotrugli, who is also known as Benedikt Kotruljević, from the city of Dubrovnik. During his life in Italy he met many merchants and decided to write Della Mercatura et del Mercante Perfetto (On Trade and the Perfect Merchant) in which he elaborated on the principles of the modern double-entry book-keeping. He finished his lifework in 1458. However, his work was not published until 1573.

For this reason, Luca Pacioli (1445 - 1517), also known as Friar Luca dal Borgo, is credited for the "birth" of accounting. His Summa de arithmetica, geometrica, proportioni et proportionalita (Summa on arithmetic, geometry, proportions and proportionality, Venice 1494), a synthesis of the mathematical knowledge of his time, includes the first published description of the method of keeping accounts that Venetian merchants used at that time, known as the double-entry accounting system. Although Pacioli codified rather than invented this system, he is widely regarded as the "Father of Accounting." The system he published included most of the accounting cycle as we know it today. He described the use of journals and ledgers, and warned that a person should not go to sleep at night until the debits equaled the credits. His ledger had accounts for assets (including receivables and inventories), liabilities, capital, income, and expenses — the account categories that are reported on an organization's balance sheet and income statement, respectively. He demonstrated year-end closing entries and proposed that a trial balance be used to prove a balanced ledger. His work also touched on a wide range of related topics from accounting ethics to cost accounting.

What Does an Accountant Do?

Since Accountants are independent business advisers, they are in a position to help the clients build and develop their businesses. Accountants can offer an extensive range of services. Some of the types of services include:

1. Auditing a company: Accountants, who are legally registered auditors, may audit a company's accounts - such an audit may, in some circumstances, be required by law.
   
   
2. Assurance and Information Integrity: Accountants also can provide a variety of services that improve and assure the quality of information, or its context, for business decision-making. And also be ensuring that financial statements reflect fairly the financial performance of the company.
   
   
3. Forensic Accounting: Preventing, detecting, and investigating financial frauds such as embezzlement, securities fraud, tax evasion, and money-laundering schemes.
   
   
4. Environmental Accounting: Addressing how companies can be both environmentally responsible and profitable. This includes focusing the variety of projects like environmental compliance audits and managing and preventing claims and disputes.
   
   
5. Expert witness work: Accountant who has his/her own country's registry of expert witnesses who meet stringent criteria - all hold practising certificates, have undertaken suitable litigation training, have had experience of acting as an expert witness, and have been able to provide references from legal practitioner who have engaged them.
   
   
6. Insolvency work: If the clients are facing the possibility of personal bankruptcy or corporate insolvency, an accountant with his/her own country's insolvency licence can provide the clients with invaluable advice. If professional advice is sought as soon as the signs of trouble appear, then insolvency/bankruptcy may be avoided. If the clients are a trade creditor and are concerned about a debtor or have been told that a debtor is insolvent, a licensed insolvency practitioner can investigate and advise on the best course of action. To become an accountant with his/her own country's insolvency licence, stringent criteria must be met and an ongoing experience requirement must be achieved if the licence is to be renewed each year.
   
   
7. Accounting and Bookkeeping: Advice can be provided on setting up business systems, from basic bookkeeping (cashbook) to comprehensive management reporting. Some accounting firms will undertake the bookkeeping function, which may also include VAT return preparation. Practitioners can also assist in the preparation of year-end accounts.
   
   
8. Management accounting: Accountants may set up systems to ensure that the clients know how their businesses are performing. Additional services offered include budgeting and performance monitoring and helping to ensure that a business runs in a smooth and efficient manner.
   
   
9. International Services & Accounting: Provide services to support and facilitate commerce in the global market. Moreover, companies adopting International Financial Reporting Standards (IFRS) may need accountants to help reconcile IFRS with their local GAAP.
   
   
10. Corporate finance: Accountants may offer advice on how to finance a business and how to buy or sell a business, as well as other related considerations. Such as providing a variety of services to organizations and individuals that interpret and add value by utilizing a wide range of financial information. These include everything from tax planning and financial statement analysis to structuring investment portfolios and complex financial transactions, and evaluating financial information to assess liquidity, solvency and stability issues of a firm and provide meaningful information which serve as the basis for management to make informed decisions.
    
    
11. Investment advice: Advice may be sought on pensions, unit trusts, life insurance etc., from advisers authorised to give investment business advice.
    
    
12. Tax - statutory requirements and planning opportunities: Accountants are able to offer advice on tax including corporation tax, income tax, capital gains tax, PAYE and VAT. In addition, business advisers can also offer tax planning advice and minimise your tax liability now and in the future.
    
    
13. Management consulting: Accountants can provide independent advice to managers of businesses, such as provide advice and insight on the financial and non-financial performance of an organization's operational and strategic processes through broad business knowledge and judgment.
    
    Such help can be used in a variety of ways, including:
    
    - providing an external independent view
    - overseeing the stewardship of the chairman/chief executive and board members
    - encouraging and developing new ideas
    - assisting the company in difficult situations
    - bringing specialist knowledge
    - maintaining an ethical climate.
    
    
14. Advice on starting up a business: Accountants may offer advice on the legal form most appropriate to starting up a business. In addition they may advise on related legal and taxation issues, business plans for presentation to banks, and what you should expect when starting up a business.
    

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