1. Public accounting

1. the principal service offered by public accounting is auditing

1. the purpose of an audit is to lend credibility to a company’s financial statement

2. auditors carefully examine the statements and accounting records – seeking whether they are fairly reflect the company’s financial position and operating results in accordance with generally accepted accounting principles

2. Management advisory services

1. offer constructive suggestions for improving the company’s methods of operation

2. include: design, installation, improvement of a client’s general accounting system and any related information systems it have for managing the company; financial planning; budgeting; forecasting; inventory control

3. tax services (find legal loopholes)

1. accountant (through training and experience) is well qualified to render important service in tax area

2. include: preparation and filing of tax returns; advice how transactions may be completed so as to incur the smallest tax

2. Private accounting

Accountants employed in a single enterprise are said to be in private accounting:

1. general accounting: (the task of general accounting)

1. recording transactions

2. processing the recorded data

3. preparing financial reports for the use of management, owners, creditors, governmental agencies

2. cost accounting: task:

1. determine and controlling costs

2. assessing the performance of managers who are responsible for costs

3. budgeting – the process of developing formal plans for future business activities

1. the aim: is to provide management with a clear understanding of all the activities that must be undertaken and completed in order to accomplish their objectives for the company

4. Internal auditing

2. checking the records and operating procedures of each company department

3. evaluating the operating efficiency of each department

3. Governmental accounting

1. review and audit the millions of income, payroll and sales, tax returns

2. to assist in the process of detecting crimes such as fraud

3. other regulation of business

Budgeting

Corporate planning – is understanding, evaluating and establishing corporate’s/company’s objectives which falls into 3 time scales:

- long-term: (from 3 years up to as far as 20 years ahead).

- medium-term: (1 to 3 years ahead).

- short-term: (for next year).

Budget - is planning and control tool relevant to the management of a business; an activity or a process of planning and control of financial achievements of a company

The main purposes of budgeting are:

1. to assist in the assessment and evaluation of different courses of possible action;

2. to create motivation by expressing a proposed plan of action in terms of targets;

3. to monitor the effectiveness of performance being accom­plished against the budget, and to report variances.

In business planning, a company’s financial controller needs to prepare a master budget.

Master budget is a budgeted income statement, which shows budget income and expenditures, and also a balance sheet. It summarizes varies forecasts or budgets, such as: sales forecast, expected turnover, production, fixed and variable assets, all overheads (heating, gas), labour, raw materials and components.

Subsidiary budgets are Sales Budget and Cash Budget. These budgets consist of:

1. finished goods stock budget

2. selling and distribution costs budgets

3. administration cost budget

4. debtors budgets

5. production budget (raw materials budget, direct labour budget, prodaction overheads budget)

6. purchases budget

7. creditors budget

8. capital expenditure budget

9. dividends and taxation budget

There are such types of budgets:

Fixed budget – is one that is set at the start of the budgetary period and remains unchanged whatever the level of activity. The actual figures will be different from budgeted figures.

Flexible budget. This budget is a way of overcoming the difficulty caused by a fixed budget. This recognizes the different behaviour patterns of fixed costs and variable costs, depending on the level of output. The actual figures can be directly compared with budgeted figures.

Zero-based budget. With this system, the budget starts from zero and each item going into the budget gas to be justified on the basis of business activity. This budget is used to avoid the situation whaen the starting point for most budgets is to commence with last year’s budget and then to add a few per cent to allow for inflation.

Cash budget is the subsidiary budget that brings together all the other individual budgets. from a cash budget (a cash flow forecast) can be produced the master budget. The purpose of cash budget is to detail the expected cash and bank receipts and payments, usually on a month-by-month basis, for the next 3,6 or 12 months, in order to show the estimated bank balance at the end of each month throughout the period. From this budget, the managers of a business can decide what action to take when a surplus of cash is shown to be available or, as is more likely, when a bank overdraft needs to be arranged.

Budgetary control- one of the purposes of budgeting, which implies a basis for monitoring actual performance of a company (compare set of figures, accomplishment and results).