IMPORTANCE OF ACCOUNTING
Every business requires its own performance examination, data, records, analysis etc which is why accounting is an integral part of every business. Accounting gives the management information regarding the financial performance (Statement of Comprehensive Income) and financial position (Statement of Financial Position) which is integral for the stakeholder to understand the health of the business. Accounting has basically 2 methods – Single entry and double entry. Double entry is the most widely used method whereas single entry is for very small scale businessmen where accounting merely means income less expenses.
Some of the areas accounting helps a business in are as follows:
- Planning and formulating strategies in the future based on past and current performances
- It helps in coordinating various business factors such as inventory procurement
- Brings better control of resources into the business
- It a medium of communicating the state of affairs of the business, in terms of numbers
- It helps in formulating budgets
- The accountant is the position to give valuable advice
- Comparison becomes easier
- Ensuring Law of land is adequately followed
The IASB (International Accounting Standards Board) is an independent, private-sector body that develops and approves IFRS (International Financial Reporting Standards) that provides certain principles for accounting. They specify how a business should maintain its books of records to ensure consistency, transparency, and comparability. It was established to create a common accounting language.
Audit Balance Confirmations
Auditing is an independent examination of the financial statements of an entity, irrespective of its size or legal form, for the auditor to express an opinion thereon. An auditor would acquire sufficient and appropriate audit evidence in order to draw a reasonable opinion on the financial statements. An Audit Balance confirmation is audit evidence received by the auditor by a written or an electronic response from the entity or a third party verifying the accuracy of the information in the books of accounts.
DETECTION OF FRAUD
Fraud can be found early in the history of our world as men have made use of tricks, manipulation, and treachery in order to acquire money, land, goods, or trust, with the overall objective of making a profit. The fraud negatively affects an economy by causing huge financial losses, weakening social stability, threatening democratic structures, leading to a corrupting, and compromising economic and social institutions. Fraud represents the sum of irregularities and illegal actions committed with the intention of deceiving or presenting false, incorrect, or incomplete declarations and documents.
When should you start recognizing depreciation
Items of property, plant, and equipment should be recognized as assets when
- It is probable that the future economic benefits associated with the asset will flow to the entity, and
- the cost of the asset can be measured reliably.
Economic Substance Regulations in the UAE
Economic substance regulations were introduced in the UAE in April 2019 under Cabinet Resolution no. 31/2019. The UAE introduced the Economic Substance Regulations to honor its commitment as a member of the Organization for Economic Co-operation and Development (OECD) on harmful tax practices, an all-inclusive framework of OECD on Base Erosion and Profit Shifting (BEPS).
Benefits of an Accounting Software
Over the past few years, traditional accounting has witnessed major automation. Accounting software like Tally, SAP, Quick Books, etc are widely used in businesses. Few benefits of accounting software are:
Non-Recoverable Input Tax (Entertainment Services)
There are a number of circumstances in which businesses have sought clarity over the definition of ‘entertainment’ for the purposes of the input tax restriction, and in particular what should constitute entertainment of staff or business contacts as opposed to incidental business-related expenses which would be recoverable under normal VAT rules.
Importance of Accounting Standards
An accounting standard is a common set of principles, standards and procedures that define the basis of financial accounting policies and practices. Accounting standards improve the transparency of financial reporting in all countries. It relates to all aspects of an entity’s finances like assets, liabilities, income, expenses and equity. Banks, investors, and regulatory agencies count on accounting standards to ensure information about a given entity is relevant and accurate.
Types of Audit Report
An Audit is an independent examination of the financial statements of an entity irrespective of the size or legal form, whether profit-oriented or not, in order to express an opinion thereon, in the form of an Audit Report. The audit report is used by many stakeholders including the entity’s management, the board of directors, shareholders, investors, government bodies, banks, and many others. Audit reports are divided into 4, which are:
Managing Cash Flow for Business
Cash Flow in any business basically means the cash inflow from the revenue minus cash outflow from the expenses. Positive cash flow occurs when the cash receipts in the business from sales, accounts receivable, etc. are more than the amount of the cash leaving your businesses through accounts payable, monthly expenses, salaries, etc. Negative cash flow occurs when the outflow of cash is greater than your incoming cash.