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If you want to evaluate the business performances of your company, financial analysis is what you should pay attention to (Also see Characteristics of Successful Business Owners). It includes a comparison of records, usually financial data prepared using Financial Reporting Standards (Also see FRS 1）. The purpose of conducting financial analysis is to utilise that interpretation and comparison of financial data to acquire a perception about the performance of a business. This will help you in determining areas that you can refine and improve. A simple financial evaluation may bring the following advantages to your company.

• It encourages the use of the same technique so that we can quickly identify the differences in the operations of a company as time passes.
• It provides answers to some critical concerns. For instance,
i) Why does a particular business make more profit than another?
ii) Why is a business less successful than the others?
iii) What sort of gains the shareholders will obtain from their financial investment in the company as they invest in the projects?
iv) How solvent is a business?
v) Does a company have a capability of paying its debt by the deadlines?
vi) How properly a company can handle its assets, especially its working capital, for example, creditors, debtors, inventories, and so on.

A financial evaluation will clear your doubts about the queries above. It is not necessarily used to solve those concerns.

• The financial analysis enables us to analyse the short-term and long-term liquidity, the performance of the business, as well as the operational efficiency of a company (Also see How Can Bookkeeping Services Indicate Business Health?).
• By using the financial analysis, we can evaluate the changes in the performance of a unit when compared to another. Besides comparing the performance of one firm to another, we can also make comparisons between a company and the benchmark of an industry.
• There are about fifty prominent accounting ratios which are useful in analysing financial statements. Nevertheless, we should never conclude the ratio performance of a firm only by looking at a single ratio. We have to compare the outcomes with the periods before. This is to enable us to know the trends and make comparisons between firms in a similar sector.
• We do not judge firms merely by looking at their financial or ratio analysis. Instead, we use it as a supporting document to analyse the business of a firm.
• Financial analysis is also vital to all the shareholders. For example:
i) Undoubtedly, shareholders would like to ensure that the company is well-managed and they want to minimise the funds that are tied up in the company
ii) Creditors and lenders would like to know how the company handle its working capital
iii) Lenders, for example, banks, will keep an eye on the liquidity of a company to ensure that the company can settle the capital amounts and the interests they owe on a loan
iv) Competitors will be curious if a competing company has the capability of managing its assets more efficiently since that might be a competitive advantage compared to them.

You will only be able to conduct an accurate financial analysis when your balance sheets, income statements and books of accounts illustrate the actual condition of your finances. If the accounts are not prepared using the proper double entries system (Also see Advantages of double entry accounting), it can be challenging for you to evaluate the performance of your company. Thus, it is crucial to employ a professional accounting service in Singapore to handle your firm’s finances.

Investment accounting is the management of finances of a company which has invested their funds in a variety of instruments and securities. On the other hand, custodial accounting is the management of the finances by a grown-up who represents a child. Each of these are specialized parts of the sector, and your regular accountants will not perform these functions (Also see Do You Need a Tax Accountant?). Investors should engage expert accounting firms in Singapore to handle these accounts.

Investment Accounting

It is not easy to make an informed financial decision. This can be very challenging when it comes to investing in the right investments at appropriate timing. Risks are everywhere, especially when some major players in the investment industry would track every action you take. Investment accounting includes not only record-keeping but also plan for future transactions about the financial investments they hold and any chances that might show up in the marketplace. A lot of people prefer to employ experts to ensure legal compliance and handle their investment portfolios (Also see Advantages You Can Get from a Simple Financial Analysis).

Custodial Accounting

Parents or guardians may want to give a sum of money to their children. However, they may save the money in a custodial account rather than keeping it in a typical bank account to make sure of the proper usage of that amount. When they deposit the funds in a custodial account, the child who owns the funds cannot spend the funds as he wishes, yet he needs the approval of the custodian, which is his parent or guardian. Sometimes, such accounts might be opened under certain conditions, for example, when the parents of the child pass away.

Similarities

While both the accounts might seem to be very different, they have some similarities between them. Firstly, the most significant one would be both of them involve instruments and financial securities. Typically, the parents will deposit the funds in an interest-bearing bank account or an investment funds company. Thus, the primary purpose of each of these is to gain return or profit on the principle amount. Secondly, in both, someone else, but not the person who owns the funds (the principal beneficiary), will manage the funds. In investment accounting, the investment manager will manage the funds, whereas, in custodial accounting, the responsibility would be on the custodian.

Differences

The significant difference between them would be the people who would use them. Businesses would practice investment accounting, whereas families or individuals will practice custodian accounting. The purpose of the previous is to obtain returns for business purposes, whereas the latter is to assist children in obtaining money while they are still under supervision (Also see Is Opening a Business Bank Account Necessary?). Both of them are ruled under distinct regulations, and they have different needs as well as legal obligations for the recipient. There is a difference between forms of instruments too. This is because there are fewer choices available in custodial accounting when you compare it to investment accounting.

Another difference is that in investment accounting, the directors of the firm can employ an investment manager to secure the funds they have put into the investment. Contrarily, in custodial accounting, the customer can hire the custodian or any financial institution himself to manage his property and accounts. Besides, while investment managers develop financial assets within an investment portfolio, custodial accountant (Also see Four Typical Myths About an Accountant) deals with the paperwork and financial transactions of the client’s accounts.

In financial accounting, an impairment of a fixed asset occurs when an asset’s fair value falls below its recorded value all of a sudden. If you want to calculate impairment of fixed asset, you have to work out the difference between the value of the recorded asset and its fair value. Keep in mind that some impairment of the asset may be so huge that they might cause a substantial drop in the reported asset base and the profitability of your business (Also see Differences Between Investment and Custodial Accounting).

The impairment will happen only when the amount is not recoverable or receivable. This might occur when the book value is greater than the total of undiscounted cash flows which your company predicts to get from the asset over its useful life as well as the predicted profit when you dispose of the asset.

As an entrepreneur, you should regularly evaluate the assets that your company possesses to identify if some of your company assets have to be impaired in the Balance Sheet (Also see What is Balance Sheet and Statement of Affairs?). If the following happens, the impairment of assets of your business will occur.

• There is a significant change in the asset’s physical state
• There is a variation in the economics and legal aspects
• There is a substantial drop in the market price of the asset
• There is an expected and prior operating and cash flow loss related to the asset
• The asset is most likely to be disposed of before its expected useful life ends

If you want to know more about the impairment of fixed asset, you need to understand the terms below.

Fair value less costs to sell (FVLCS): You get to know this value by calculating the difference between the present market value and the expenditures that are going to be incurred when you sell the asset.

Recoverable amount: The recoverable amount is the value of the financial benefits your company will get when you utilize or sell the fixed asset. It is equal to the increase of the ‘fair value less cost to sell’ or the value in use of the asset. Keep in mind that the value in use of the asset is the current value of all anticipated cash flows related to the asset in the future.

After you evaluate your assets, you should acknowledge the impairment loss only when the recoverable amount is lower than the carrying amount of the asset. Usually, the Financial Reporting Standards requires you to identify the impairment loss as an expenditure (Also see Employ Accounting Service To Prepare Financial Statements). Nevertheless, you must identify its impairment loss as a revaluation decrease if you had carried out a revaluation of the asset. Keep in mind to complete depreciation adjustments in the future.

Accounting for impairment of fixed assets may be a challenging procedure. Hence, we suggest you get assistance by employing an accounting service Singapore if you are unfamiliar with such tasks.

You can’t escape from paying for taxes. As liable residents, it is our responsibility to pay them. They are an essential aspect of the system, and somehow, the money will be returned to you in some ways. It has been years since people have managed their taxes no matter they are operating a small company or otherwise. Some people even utilize a tax preparation program. As attractive as managing your taxes may be, the procedure is too much hassle. Also, it can be risky as you may make mistakes in your accounting that is probably avoidable. In such a situation, working with an accounting professional is your best option. You can look for excellent accounting services in Singapore which may not be that costly as well.

Below are signs which indicates that you have to employ a tax accountant without hesitation:

New Company

When you are still a newbie in the business world, you have to make a few crucial decisions. Keep in mind that the choices that you made when you first started your business is going to leave a significant long-term impact on your company (Also see Pros and Cons of Setting up a Corporation). The financial structure of your company will be the determining factor of how you file and pay your taxes.

At this moment, employing an accountant will enable you to select the most effective structure for your company. Their professional suggestions can assist you with the financial choices, and at the same time, ensures that you comply with the rules and regulations set by the authorities (Also see Benefits of Engaging Bookkeeping Services).

Expanding Your Company

Accounting professionals can assist you throughout your adventure from a new company to a reputable one. When your company is developing, it indicates that both your profits and expenses are growing. Throughout the process of developing, the best you can do is to have a professional beside you since he or she can alert you about the disadvantages of specific financial investments or a piece of information regarding the advantages so that you may receive your profits. By doing so, you can avoid yourself from making undesirable choices about your financial investments.

The Complicated Documentation

As your company continue to develop, dealing with the taxes and paperwork turn out to be complicated. As there are various types of business, you have different tax returns forms to fill in. Dealing with piles of paperwork needs extra time and energy, which would inevitably make you feel anxious. Employing an accountant is a must as he has a good understanding of his job and hew can complete the tasks efficiently. Thus, it saves you a great deal of time as well as gets the job completed on time without making any mistake.

High Accuracy

Taxes may not be something that you can be very familiar with, so the smallest errors can set you back a lot. The fines set by IRAS can be substantial, particularly if you are running a small business (Also see Tax Avoidance and Tax Evasion). An accounting professional can assist you with filing and depositing taxes to ensure that you are paying the exact amount that you should pay to the government.

Handling the taxes on your own or by using a program, may seem to be simple, yet the process is rather stressful, especially when you own a company. Occasionally, some consumers overlook the rebates, and they will find themselves spending a lot more on taxes. Hence, look for an accounting services (Also see Are Accounting and Bookkeeping the Same?) that assist your business and ease the process of preparing for taxes.

A corporation (Also see Benefits Of Accounting Services For The Corporate World) is the most common way of doing business by most of the world’s largest firms. It is different from a partnership or a sole proprietorship as a corporation is a business which has received legal recognition as a separate legal entity along with its responsibilities, powers as well as liabilities.

Before the business owners make up their mind whether to set up an incorporation or not, there is a few advantages and disadvantages that they should take into consideration.

Advantages

Owners can sell their ownership interest easily

If the stock is traded in public, it will only take a couple of minutes for the investors to sell the ownership interest they have in a corporation directly by giving orders to their stockbroker. By signing a transfer statement, the owner can transfer the stock certificate to another person if the stock is not traded in public.

Limited liability

Typically, people who own a corporation will not lose more than the amount of funds they have put into it. Conversely, an owner of a partnership or a sole proprietorship proprietor can lose not only his or her investment but also various other private assets. That is to say, doing business in the corporate form protects the owners from the majority of creditors. This takes place as corporations are considered as legal institutions, and due to this status, a corporation has the right to sue others, and they may be sued too (Also see Accounting Principles – Going Concern). Besides, a corporation needs to pay for the income taxes on its taxable revenue.

Corporations may potentially pay lesser taxes

Some say that a typical corporation’s net earnings are first taxed on the corporation’s tax return. The corporation may give out part of its net earnings to the shareholders in the form of a tax-free dividend.

If the company is very profitable (Also see Ways to Increase Your Business Revenue), it may be required to pay tax lower than it would be otherwise when the business is run using sole proprietorship or partnership.

To acquire more understanding right into this issue prevent or reduce the impact of this potential concern, you must discuss with legal and tax experts about various patterns of business structures. Engage an accounting service in Singapore if you have any queries.

Funds can be raised quickly

Because of limited liability as well as the convenience of purchasing or selling shares, it is understandable why investing in corporations is a more attractive choice for most investors, compared to investing in partnerships or sole proprietorships. The corporations’ ability to allure investors enables them to be able to collect the funds required to handle and develop their operation.

Disadvantages

Legal complexity

To establish incorporation, one has to submit the application and get the approval of one of the states. As soon as the request is approved, the corporation has to abide by that state’s policies (Also see Questions You Should Answer Before You Start Your Business). On the other hand, it may only take you a few minutes to establish a sole proprietorship. Sometimes you will need a tax identification number from the state, and nothing more than that is required. Sole proprietorships do not have to comply with a lot of the lawful demands imposed on a corporation.

Higher Maintenance Costs

All corporations required to hold AGM and prepare a set of audited (Also see Ways to Ensure a Smooth Audit Process in Your Company) or unaudited financial statement once per annum. These additional mandatory requirements no doubt increase the maintenance cost of running a business using a corporation.