Financial accounting

Financial accounting is a systematic process of collecting, registering, summarizing and presenting information about the economic activities of an enterprise. It involves, firstly, the formation of financial statements, secondly, checking the reliability of information on transactions, and thirdly, resolving the issue of tax accounting. Financial (accounting) accounting must comply with current national legislation, in particular national and international standards (NP(S)BO, IFRS). In the article, we will consider the issue of the need for its maintenance, the correct procedure for its organization at the enterprise and the main areas of work of an accountant in this context.

Financial accounting for business: what problems does it help to solve?

Financial accounting (hereinafter referred to as accounting) is an important tool for business management. It begins from the first day of the company’s existence and ends only with its liquidation, ensuring a complete reflection of all financial transactions. Such accounting helps not only to effectively manage assets and business activities as a whole, but also to avoid undesirable financial risks (including from the tax side). Such a mechanism helps to overcome the following problems:

• uncertainty of the financial situation (provides a clear picture of the assets, liabilities, and results of the enterprise);
• lack of proper control to avoid risks of abuse (each transaction is recorded in a documented manner, which allows the accountant to track the movement of funds from point “A” to point “B” respectively);
• difficulties with tax obligations (helps to optimize the tax strategy, avoid tax sanctions, and pay mandatory payments on time).

How to properly organize financial accounting at an enterprise?

Organizing accounting is a very important management process. The head of the enterprise is responsible for this, while the accounting department must definitely be involved in the development. The main steps in organizing financial accounting are as follows:

• creating an accounting department (filling the positions of chief and ordinary accountants);
• developing a draft regulation on the accounting policy at the enterprise;
• developing job descriptions for each of the positions in the accounting department;
• approving the accounting policy/instructions by order of the manager.

Important to know! To simplify work with finances and reports, it is also necessary to introduce the use of specialized accounting programs (in particular, ERP systems) at the enterprise. This will also help to track the work of employees and control the timeliness of accounting. For more detailed information, we recommend ordering a consultation with our accountant.

What documents does an accountant work with to maintain financial accounting for a business?

To keep records, an accountant records each business transaction, prepares reports, and other documentation. As a general rule, the main documents in his work are:

• first, primary documents (invoices, certificates of work performed, business contracts, etc.);
• second, documents on the flow of funds (bank statements, payment orders, cash orders, etc.);
• third, asset accounting documents (inventory cards, inventory certificates, write-off certificates, accounting registers);
• fourth, internal regulations and reports (orders, financial performance reports, etc.).

Financial (accounting) accounting reporting: what basic reports does an accountant prepare?

Financial statements are the final product of accounting and the main source of information about the financial condition. They are used in various cases, in particular when a business wants to obtain credit (then it is necessary to prove the proper financial condition). In Ukraine, financial statements consist of:

• balance sheet;
• statement of financial results;
• statement of cash flows;
• statement of equity.

Important to know! Financial statements prepared as part of accounting are also important because they are used to formulate tax reporting – income tax declaration, VAT, etc. Often, enterprises also take responsibility for submitting individual reports to state statistics bodies (for various reasons).

Accountant for the organization and maintenance of financial accounting at the enterprise: what services can he provide?

An accountant covers the entire financial management system at the enterprise. As part of the performance of the duties assigned to him, he:

• develops and implements accounting policies;
• organizes financial document flow;
• maintains a working chart of accounts;
• checks primary documents;
• maintains and controls banking and cash transactions;
• prepares the enterprise’s balance sheet and mandatory financial reports;
• calculates all necessary taxes;
• is engaged in timely submission of reports to state bodies;
• establishes a system of internal financial control to prevent fraud, etc.

Financial accounting will not be possible without an experienced accountant. Law Firm “Prikhodko & Partners” can offer the services of its specialist, who will be a reliable assistant for both new businesses and experienced enterprises. To find out the cost of his services, fill out the form below.