Author: admin

Accounting is the key to success for every business as it helps business owners to have an in-depth understanding of the financial health of their company. The records and interpretation of business activities form the central part of accounting. If business owners (Also see Tips to Become Intelligent Business Owners) get to know the inflow and outflow of their business funds well, they will be able to make sound decisions based on the data so that their business can continue growing.

When you are planning for your business, you should never underestimate the importance of accounting. If you totally have no idea on how your money flows, you will most probably lose control of the finances of your business. However, you don’t have to be too worried if you do not know much about accounting or if your small business cannot afford to employ full-time accountants. There is an alternative to this, that is to hire an accounting firm in Singapore and let the experts complete the accounting tasks for you.

The primary purpose of accounting is to keep records of the financial activities that a business has carried out. When the business owners or the accountants want to track the revenue earned as well as the expense incurred in the normal course of business operations, they may look at the ledger. If they have kept accurate records of their financials, they will know the trends in the cash flow, and they will be able to plan for the future.

Apart from making future plans, accounting also provides information for business owners to analyse the performance of their company. This is what successful business owners would always do. By using historical records and the current data, they will be able to evaluate the company’s financial health. This helps business owners to determine the well being of their business (Also see Ways to Increase Your Business Revenue). Furthermore, referring to the historical data provides them with a chance to learn from past experience, and they will be able to make sound decisions for the future.

Besides, accounting (Also see Are Accounting and Bookkeeping the Same?) help business owners to be in compliance with the requirement of laws. If they always keep up-to-date and accurate records, they do not need to worry that they have overlooked small details, which may bring serious consequences to the business. Insufficient or unorganised records can result in errors in tax filings, which can cause the tax authorities to audit your company. This can bring you some unnecessary legal problems if not properly managed.

Without a doubt, all business owners hope that their business can be successful and can sustain for a long time. If they want to achieve this, accounting is something they should never leave behind. Apart from tracing business transactions, business owners will be able to prepare financial (Also see What is a Financial Statement Review?) reports that help in decision making with the help of accounting too.

A financial statement review refers to a service where the company’s accountants get a limited assurance which means that the accountants do not have to make any material modifications on the company’s financial statement for it to comply with the financial reporting frameworks. For financial statement reviews, the accountants do not need to understand the internal control, evaluate the fraud risks, or conduct any audit procedures. As a result, the accountants will not obtain an assurance that they are aware of all the crucial issues which the auditors will typically discover and disclose in an audit (Also see Checklist for the Workplace Audits).

A financial statement review costs more than a compilation, but it is cheaper than an audit. The business owners (Also see Characteristics of Successful Business Owners) whose creditors and lenders will let them use a review will prefer using this approach since they can save the cost of employing an audit firm in Johor Bahru to perform an audit for them.

In a financial statement review, the company’s management is responsible for preparing and presenting its financial statements. On the other hand, the accountants need to possess sufficient knowledge about the company and the industry it is involved in so that they are capable of reviewing the financial statements.

In a review, the company’s accountants (Also see How Do Accountants Carry Out the Accounting Process?) need to conduct the procedures required to give them a reasonable basis for acquiring a limited assurance by which the company does not have to make any material adjustments to let its financial statements to be compliant with the pertinent financial reporting frameworks. The focus of these procedures is mainly on the areas with a high risk of having misstatements. Listed below are the procedures that the accountants may use to conduct a financial statement review.

– Review the reports that the management has issued about any accountants who have completed a review or an audit (Also see How to Reduce Time Required for Audit Cycle?) on the company’s financial statements in the previous accounting periods

– Continue examining or observing the issues that arose in the last review

– Assess the communication between the company and the regulatory agencies

– Inspect any notable transactions that happen near the end of the company’s accounting period

– Ask about the material activities which occurred after the date of the company generating the financial statements

– Ask about the procedures the staff takes when they record accounting transactions

– Go through the company’s financial statements to determine whether they comply with the pertinent financial reporting frameworks

– Perform ratio analysis with the forecasted and historical result.

– Inspect complicated or abnormal situations which may influence the reported results

– Inspect inconsistent findings

– Inspect notable journal entries

If the accountants have conducted the financial statement review and they think that the company has materially misstated its financial statements, they need to conduct more procedures so that they can get a limited assurance that the company does not have to make material adjustments on those statements. If the company has materially misstated the statements, the accountant should either disclose that matter in the report or withdraw from the review.

When you outsource your accounting tasks to an accounting firm in Johor Bahru, the accountants will not only record business transactions timely but also prepare the essential financial statements for you. The income statement (Also see What is an Income Statement?) is one of the crucial financial reports that all businesses should generate. It provides the summary for all revenue earned and expenses incurred in a specific timeframe.

The income statement aims to determine the company’s profit or loss, and it acts as a measure of the business activities that it has carried out. Thus, the main purpose of studying the company’s income statement (Also see Why Do We Need the Income Statement?) is to let the readers get a clear picture of the revenue and expenses of the company in that accounting period. By looking at this statement, one will be able to determine whether the company is profitable and whether it can earn recurring revenues from its continuous operations.

The first line item in the income statement (Also see The Income Statement and the Balance Sheet) is the total sales revenue. This amount shows the sum of money that the sales of products or services have brought to the business. Note that business owners who apply the accrual basis of accounting should recognise the revenue (Also see Ways to Increase Your Business Revenue) earned in their books of accounts even though they have not received cash from the sale to be in line with the revenue recognition principle.

Some companies may include sales discount and sales returns in their income statement. Sales discount refers to a price reduction that the company offers to its customers if they pay the bills early. Sales returns are the goods that the customers send back to the company due to reasons such as defective products, products sent are not what they have ordered, the company has sent extra goods to them, and so on. After deducting the amounts of sales discounts or sales returns from gross sales, we will get the sum of net sales.

In the income statement, you will see the cost of goods sold too. This is the sum of money the company pays for the merchandise sold in the accounting period. To calculate the gross profit earned, one should deduct the cost of goods sold from the company’s net sales. The gross profit and gross profit margin are both useful in helping the management to understand the performance of the company and plan for future business operations.

The income statement will also show the selling and administrative costs incurred in the normal course of business. Both are the operating expenses of the business. After knowing the sum of operating expenses incurred, one will be able to work out the operating income of a business by calculating the difference between the gross profit and the operating expenses. This is the income that the company has generated from its core business activities.

Also, you may see interest income and interest expense in the income statement. Interest income refers to the interest earned by the company by keeping their excess cash in the bank accounts. As against, interest expense is the interest that the company needs to pay on the money that they have borrowed from the banks or financial institutions.

There will be a part that records the income before tax of the business too. This is the sum of money the company has earned from its operating and non-operating activities before including the sum of income taxes the business should pay. In some cases, people may choose to compare two companies by comparing their income before tax because their tax rates may not be the same.

Finally, net income is the line item that will appear as the bottom line in the income statement. The is the amount remaining after the company has added other revenues to it, as well as has deducted operating expenses, other expenses and income taxes from it. This is the final figure, and the accountant will transfer it to the company’s retained earnings.

Overhead costs refer to those costs that are not directly related to the production and manufacturing process of a company. Therefore, these are the indirect costs that the company needs to pay whether there is any production. Some business owners (Also see Characteristics of Successful Business Owners) find it challenging to account for the expenses related to their business activities. If they do not find a way to solve this problem, this will eventually lead to messy books, especially the calculations that are related to the calculation of costs. Hence, to avoid such a situation from happening, business owners may consider seeking help from an accounting firm in Johor Bahru.

Overhead costs are the costs the company has spent on indirect labour, indirect material, as well as other operating expenses like the rentals, utilities and so on. These costs are related to the daily business operations that the company has carried out. Yet, it is unable to charge these expenses (Also see Direct Expenses and Indirect Expenses) directly to any of its products or services offered to the customers. This means that the indirect costs cannot be determined with a particular cost per unit of a product or a service.

Indirect costs vary among different companies. They play an essential role in ensuring that the business (Also see Questions You Should Answer Before You Start Your Own Business) can run smoothly. They may be classified as fixed costs or variable costs depending on their behaviour. The former will not be affected by the level of output while the latter will vary with the production levels. Some examples of fixed costs include rental and depreciation, and examples for the second are costs incurred for shipping, production supplies and so on.

If we classify the overhead costs according to their functions, there are a few different types of overhead costs. Manufacturing overheads include all kinds of indirect costs like indirect labour, indirect material, as well as other indirect expenses. These are the costs incurred during the manufacturing processes. Another type of cost is the selling and distribution overheads. These are the costs incurred when the company markets and sends the products. Administrative overheads, on the other hand, refer to the costs that the company has incurred on administrative and accounting tasks. These are the costs that it would not be able to allocate to each unit of its products.

To allocate the overhead costs, business owners need to select an approximate cost centre. They should consider a few factors when they are doing this, which include information about the nature of the cost as well as the controls required. Then, they need to determine the cost that is attributable to a specific cost centre. The next step is cost apportionment, where they should allocate the costs in different cost centres according to the estimated benefits that each cost centre will receive.

Business owners should always keep a tight grip on the overhead costs, and they should make an effort to lower these costs. By doing so, the company will be able to price the products and services it provides more efficiently. Thus, this increases the competitiveness of the business (Also see How Can Bookkeeping Services Indicate Business Health?) when compared to its competitors.

For business owners who are not familiar with accounting, one of the biggest issues they may encounter when recording business transactions is the categorisation. As an example, they may not know how to classify the assets their company owns, or they are not sure about how they should group the revenue (Also see Ways to Increase Your Business Revenue) and expenses correctly. If you are one of them, why not consider hiring an bookkeeping services in Singapore? The professionals will help you to record business transactions as well as generate financial statements without costing you much compared to the cost you need to hire a full-time in-house accountant.

In this article, we will shed light on unearned revenue (Also see Introduction to Accrued Revenue). It refers to the amount of payment that the company has received in advance for the goods and services that it will provide to the clients in the future. Unearned revenue falls under the category of liability as the company has received the payment for the work that it has not performed.

One should categorise unearned revenue as the liability of the company because the company has received the payment in advance without providing the goods or services to the party which has made the payment. According to the accrual concept of accounting (Also see Accounting principles: Accrual concept), business owners should not recognise the payment as its income until their company has provided the goods or services to the client. Hence, they need to use a different method to record the unearned revenue, instead of using the same way of how they record the earned revenue.

The payment that the company has received in advance will become the company’s liability until it delivers the goods or provides the service to the party. The advance obtained is the debt that the company owes to the customer. Thus, the unearned revenue will appear as the company’s liability on the balance sheet (Also see The Income Statement and the Balance Sheet).

As soon as the company delivers the products or services to the customer, the unearned revenue will become its revenue. At this stage, the revenue will become the company’s income and will no longer be the company’s liability. Business owners should make the corresponding adjustments in the financial statements too, which is to record the revenue as an income in the profit and loss statement.