Uses of Cash Books in Accounting

So what are cashbooks used for? In accounting they are used to record both cash transactions received by the business and cash paid out by the business. It has two sides; The debit side and the credit side. Each side of the cash book in accounting has columns for;

-Date

-Particular; where you record the products.

-Bank; This is where you record payments made by cheques and receipt of cheques.

-Cash; This is the column where you should record cash received and cash paid out.

Debit side; This is used to record any cash received after which it is posted in the cash column in the cash book. For example if you made sales on a cash basis of goods worth 80,000$, then this will be recorded on the debit side on the cash book. The debit side is also used to record cheques received by the business i.e if a customer pays for goods by cheque worth 120,000$, then this is recorded on the debit side on the bank column.

Credit side; The credit side is used to record cash and cheques paid for by the business. For example if your fuel costs about 100$ and is used up in a day, then it will be credited or written on the credit side of the cash book.However if the supplies are paid for using a cheque worth 200,000$ then it is recorded on the Bank column of the credit side of the cash book. So what is the importance of a cashbook in accounting anyway? You may ask. Well…

1. It helps the business in capturing all the payment and receipt for a particular month or duration.

2. It is used to reconcile Bank statements.

3. It can be used as a reference in accounting during auditing hence it gives evidence that goes a long way in directing the auditors while they are going through your books of account.

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Third World Challenges in Accounting

Most third world countries lack a lot of resources that most industrialized countries, such as the United States, possess. One of the many things they lack would be the knowledge and practice of efficient accounting standards and systems. These countries are ones that have many other issues in common such low national income per capita, low living standards and high levels of unemployment. Today, third world countries are broken down into different categories: “Newly Industrialized Countries” (NICs), “More Developed Countries” (MDCs) and “Least Developed Countries” (LDCs). NICs describe countries that are somewhere between an industrialized country and a third world country. Countries in this category are normally characterized by rapid economic growth driven by exports and a migration of workers from rural to urban areas. They share many similar traits of underdeveloped countries, but seem to be moving more in direction of developed countries. MDCs would be countries that are above LDCs, but below NICs in terms of gross national income per capita, economic growth and other measures. LDCs refer to countries that are really lacking in all areas that help to build economic growth. These countries account for less than 2% of the world GDP and 1% of global trade in goods (UN-OHRLLS). As previously stated, countries in each of these 3 categories have a lot in common that classify them as a certain type of third world country.

In regards to accounting, these countries face a lot of similar issues such as poor internal control, absence of management accounting, incomplete/inaccurate records and more. One published work breaks down these issues of accounting in developing countries into 4 components: Enterprise, Government, Education and Profession. The enterprise component describes accounting issues for privately owned companies in developing countries. This revolves mainly around the lack of qualified staff to perform accounting tasks such as auditing and bookkeeping. This issue adds on the lack of cost accounting skills needed to properly prepare financial statements and annual reports, which leads these companies to search for outside accounting assistance. The government component ties in the local and national governments of developing countries and their weaknesses in accounting. Their problems stem from the use of obsolete accounting methods, such as the cash-method. Just as the problems with privately owned firms, the governments show a lack of qualified staff to perform financial obligations for the country. This will lead to poor internal control systems, inefficient management and will eventually affect foreign trade if the country’s financial records aren’t properly prepared. Poor records can also attribute to irregular information in terms of the country’s economic standing. The education component explains the lack of resources to properly educate students in developing countries who are pursuing an accounting degree. These resources include textbooks, curriculum content and, once again, lack of qualified staff to teach the students. The last component deals with the overall accounting profession in third world countries. Most of these countries do not have a professional body or standards of doing things. Without proper guidelines and training for the accounting profession, citizens in these countries working in the accounting field will not be suited for any accounting positions. As another result, this contributes to the high lack of qualified staff to teach accounting students and perform efficient accounting duties for private and public firms. (Springer)

Some solutions to these accounting challenges can be defined by first looking at the history of accounting in developing countries. Most of these countries have been using accounting methods that are obsolete. Additionally, we know from the 4 components described above that the main causes of poor accounting practices in developing countries are the lack of qualified accountants and improper internal controls, but another main cause would the lack of importance put on this issue in comparison to other issues the country may be dealing with. In order to find solutions to their problems with proper accounting standards, the developing countries must first put a higher level of importance on solving these issues. Only after that can these countries be willing to seek help from accounting professionals from developed countries. These professionals would have the skills and knowledge required to properly educate third world citizens who are pursuing an accounting degree. Taking these first 2 steps will open up more opportunities for schools and enterprises in developing countries to expand their programs for accounting and finance using more modern and useful accounting standards and techniques.

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What Is The Difference Between CPA and ACCA?

There can often be confusion about the various classifications which accountants can have and the meaning which they have. There are various terms used from charted to uncharted, CPA, ACCA, CMA and ICAS to general public the world of accounting can be an extremely confusing one. No matter what the qualification you will always get good versions and bad versions of accountants with the same qualification. However to keep things simple the best solution when it comes to choosing an accountant is to base you decision upon personal recommendations or based on the past performance of the account/accountant agency.

 

The terms CPA and ACCA both involve a qualification for professional accounting. CPA stands for Certified Public Accountant while ACCA is an abbreviation of the Association of Chartered Certified Accountants. The most obvious difference between these two terms is their origination with CPA originally being established in America and ACCA being based in the UK. CPA started in the 1800’s with all applicant required to pass an entrance exam set by the American Institute of Certified Public Accountants (AICPA). Applicants are also required to have relevant work experience in order to be awarded the CPA certification. This award is generally quite a broad certificate covering everything from taxes to auditing. Holders of these qualification are often found throughout the industry and also in house within organisations. This is opposed to holders of an ACCA certificate who are often found within accountancy agencies.

 

Even though the ACCA is established in the UK it now holds members worldwide. To become a full member applicants must complete and pass an entrance exam and hold a minimum of 3 years relevant experience in the industry. The entrance exam for these certificates vary widely with the CPA exam covering areas including auditing and attestation, financial reporting, accounting and regulation as well as aspects such as business environment and concepts. In stark opposition the ACCA certification is divided simply into two areas. These are fundamentals and professional with fundamentals covering knowledge and skills required with the professional section covering essentials and options applied in accounting practices. It is obvious that there is a lot of confusion and difference in opinions when it comes to the world of accounting and the terminologies used. As a result additional agencies have been established such as the Institute of Chartered Accountants of Scotland (ICAS) whose purpose is to find a resolution to the Principles versus Rules debate within international accounting standard setting. As technology improves and businesses expand there are increasing merging of boarders between practices and countries. With this in mind it has now become for all accounts no matter their qualification to grow with the industry and become not only multidisaplined but also increasingly aware of the variations in practices across the world.

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Fraud Detection and Prevention in Financial Reporting – Is It the Auditors’ Responsibility?

The issue of fraud has been in existence for ages leading to the collapse of most businesses due to misleading financial reporting and misappropriation of funds. It has also questioned the integrity of some key industry players as well as major accounting firms. Unfortunately, fraud is not in any physical form such that it can easily be seen or held. It refers to an intentional act by one or more individuals among management, those charged with governance, employees, or third parties, involving the use of deception to obtain an unjust or illegal advantage.

According to the Association of Certified Fraud Examiners, fraud is defined as any intentional or deliberate act to deprive another of property or money by guile, deception, or other unfair means. It classifies fraud as follows:

  • Corruption: conflicts of interest, bribery, illegal gratuities, and economic extortion.
  • Cash asset misappropriation: larceny, skimming, check tampering, and fraudulent disbursements, including billing, payroll, and expense reimbursement schemes.
  • Non-cash asset misappropriation: larceny, false asset requisitions, destruction, removal or inappropriate use of records and equipment, inappropriate disclosure of confidential information, and document forgery or alteration.
  • Fraudulent statements: financial reporting, employment credentials, and external reporting.
  • Fraudulent actions by customers, vendors or other parties include bribes or inducements, and fraudulent (rather than erroneous) invoices from a supplier or information from a customer.

Fraud involves the motivation to commit fraud and a perceived opportunity to do so. A perceived opportunity for fraudulent financial reporting or misappropriation of assets may exist when an individual believes internal control could be circumvented, for example, because the individual is in a position of trust or has knowledge of specific weaknesses in the internal control system. Fraud is generally fuelled by three variables: pressures, opportunity and rationalization as depicted in the diagram.

There is the need to distinguish between fraud and error in financial statement preparation and reporting. The distinguishing factor between fraud and error is whether the underlying action that results in the misstatement in the financial statements is intentional or unintentional. Unlike error, fraud is intentional and usually involves deliberate concealment of the facts. Error refers to an unintentional misstatement in the financial statements, including the omission of an amount or disclosure.

Although fraud is a broad legal concept, the auditor is concerned with fraudulent acts that cause a material misstatement in the financial statements and there are two types of misstatements in the consideration of fraud – misstatements resulting from fraudulent financial reporting and those arising from misappropriation of assets. (par. 3 of ISA 240)

Misappropriation of assets involves the theft of an entity’s assets and can be accomplished in a variety of ways (including embezzling receipts, stealing physical or intangible assets, or causing an entity to pay for goods and services not received). It is often accompanied by false or misleading records or documents in order to conceal the fact that the assets are missing. Individuals might be motivated to misappropriate assets, for example, because the individuals are living beyond their means.

Fraudulent financial reporting may be committed because management is under pressure, from sources outside and inside the entity, to achieve an expected (and perhaps unrealistic) earnings target – particularly since the consequences to management of failing to meet financial goals can be significant. It involves intentional misstatements, or omissions of amounts or disclosures in financial statements to deceive financial statement users. Fraudulent financial reporting may be accomplished through:

i. Deception i.e. manipulating, falsifying, or altering of accounting records or supporting documents from which the financial statements are prepared.

ii. Misrepresentation in, or intentional omission from, the financial statements of events, transactions, or other significant information.

iii. Intentionally misapplying accounting principles with regards to measurement, recognition, classification, presentation, or disclosure.

The case of Auditors’ in Fraud Detection and Prevention in Financial Reporting

Auditors maintain that an audit does not guarantee that all material misstatements will be detected due to the inherent limitation of an audit and that they can obtain only reasonable assurance that material misstatements in the financial statements will be detected. It is also known that the risk of not detecting a material misstatement due to fraud is higher than that of not detecting misstatements resulting from error because fraud may involve sophisticated and carefully organized schemes designed to conceal it, such as forgery, deliberate failure to record transactions, or intentional misrepresentations being made to the auditor.

Such attempts at concealment may be even more difficult to detect when accompanied by collusion and as such the auditor’s ability to detect a fraud depends on factors such as the skillfulness of the perpetrator, the frequency and extent of manipulation, the degree of collusion involved, the relative size of individual amounts manipulated, and the seniority involved. However, users of financial information expect auditors to take steps to detect fraud during the audit because they are often displeased when fraud goes undetected and is later uncovered by a tip or accident whiles the resulting investigation or financial statement restatement creates negative consequences for the company and its employees.

Who then has the responsibility to detect fraud in financial reporting?

Auditors’ responsibilities and roles in audit are enshrined in the International Standards on Auditing (ISA) which serves as the “bible” for auditors in the discharge of their duties and to ensure that their reporting complies with international standards. The provisions of the standard which are under consideration for this purpose are ISA 240 (i.e. The Auditor’s Responsibilities Relating to Fraud in An Audit of Financial Statements) and ISA 315.

Paragraph 4 of ISA 240 deals with the responsibility for the prevention and detection of fraud and it states that “the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management. It is important that management, with the oversight of those charged with governance, place a strong emphasis on fraud prevention, which may reduce opportunities for fraud to take place, and fraud deterrence, which could persuade individuals not to commit fraud because of the likelihood of detection and punishment. This involves a commitment to creating a culture of honesty and ethical behavior which can be reinforced by an active oversight by those charged with governance. Oversight by those charged with governance includes considering the potential for override of controls or other inappropriate influence over the financial reporting process, such as efforts by management to manage earnings in order to influence the perceptions of analysts as to the entity’s performance and profitability”.

Paragraph 5 also states that “An auditor conducting an audit in accordance with ISAs is responsible for obtaining reasonable assurance that the financial statements taken as a whole are free from material misstatement, whether caused by fraud or error. Owing to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements of the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs”.

Besides, ISA 315 requires auditors to evaluate the effectiveness of an entity’s risk management framework in preventing misstatements, whether through fraud or otherwise, during an audit and that auditors should consider the risk of misstatement from fraud or error of each significant account balance, recognizing the material classes of transactions included therein, in order to identify specific risk and if a material misstatement is found due to the possibility of fraud, then that could cause them to question management’s integrity and the reliability of evidence obtained from management in other areas of the audit.

Theses suggests that the Directors are responsible for ensuring that the company keeps proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company as well as responsible for safeguarding the assets of the Company and taking reasonable steps for the prevention and detection of fraud and other irregularities and that auditors’ responsibility is to express an opinion on whether the summary financial statements are consistent, in all material respects, with the audited financial statements based on their procedures, which were conducted in accordance with International Standards on Auditing (ISA). Is for this reason that all annual financial reports have directors and auditors’ responsibilities clearly spelt out.

Conclusion

Obviously, it can be concluded that auditors play just a complementary role in the detection and prevention of fraud in financial reporting and that the ultimate responsibility rest with those charged with governance.

The Institute of Internal Auditors (IIA) standard 1210.A2 however requires auditors to possess “sufficient knowledge” to identify indicators of fraud meaning that while auditors cannot be expected to develop these skills to the level of a fraud examiner, they should try to become more proficient through training, hands-on experience, reading the professional literature, brainstorming, and using fraud detection skills during the audit so they be aware of the impact of both fraud and error on the accuracy of the financial statements.

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Six Areas of Specialization For Managerial Accountants

Unlike a financial accountant, an accountant working with management has various areas of specializations. These areas are above and beyond those one would normally find a financial accountant performing. Some of the duties and responsibilities a financial account may perform are as follows: records, sorts, and files accounting information. The maintaining of one’s specialty in performing services covering cash management, payroll, accounts receivable, accounts payable, inventory, or purchasing transactions. Finally, the financial accountant may also be involved in a small portion of the total accounting responsibility for a firm as in relation to an accountant working with management who has a broader view of the operation and greater responsibilities.

The following are six areas of specializations one would expect a management accountant to be able to perform in an effective and efficient manner in compliance with Generally Accepted Accounting Principles (GAAP):

  1. Accounting Information System. Management accountant in this area designs and implements manual and computerized accounting systems to gather managerial information for better management practices.
  2. Financial Accounting. Based on the accounting data prepared by the financial accountant, management accountant prepares various reports and financial statements, and helps in analyzing, operating, investing, and financial decision making for management effectiveness and efficiency.
  3. Cost Accounting. The cost of producing or providing services must be measured. Further analysis is also done by an accountant working with management to determine whether the products and services are being produced in the most cost-effective manner.
  4. Budgeting. In the budgeting process, a managerial accountant helps management develops a financial plan which positively impacts profitability and improves cash flow.
  5. Tax Accounting. Instead of hiring a public accountant, a company may use its own managerial accountant. For example, one may focus on tax planning, preparation of tax returns, and dealing with the Internal Revenue Service and other governmental agencies.
  6. Internal Auditing. Internal auditors review the operating and accounting control procedures adopted by management to make sure controls are adequate and are being followed. Managerial accountant may also monitor the accuracy and timeliness of the reports provided to management and to external parties for accuracy and compliance with rules and regulations in accordance with GAAP.

© Joseph S. Spence, Sr., 9/7/09

© All Rights Reserved

Submitted by “Epulaeryu Master.”

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How Globalization Is Affecting Accounting in the US

Globalization has led to most countries following and teaching principles of IFRS. United States based companies follow the rules of GAAP which causes complications for United States companies that want to do business internationally. Both practices of accounting provided useful and accurate interpretations of a company’s financial situation. However comparing a financial statement that was made following GAAP to a statement that follows IFRS could lead to meaningful discrepancies.

The United States uses GAAP or Generally Accepted Accounting Principles for financial reporting. GAAP are rules that must be followed on financial statements and only are acceptable within the US. Unlike GAAP, IFRS or International Financial Reporting Standards is principal based. This means when business transactions occur GAAP must follow a certain progression of steps to record it. Whereas IFRS is able to interpret the transaction is a few different ways. Another difference with IFRS being principle based versus GAAP being rules based is you cannot find a loophole in a principle as easily as you could a rule. Since principles are vaguer than a specific rule it covers more potential threats to unfaithful reporting. An example of this would be historical cost used in GAAP versus the “real value” used by IFRS for fixed assets. Historical cost used the price paid for the asset while “real value” uses the estimated value of the asset today. “Real value” is extremely useful for companies who invest in something for its future economic benefit.

Another United States companies face is double accounting work. For reporting and auditing financial information United States based companies are required to us GAPP which is useful when comparing financial statement to other US based companies or internally within the business for management. However for international reporting, and in more than 110 countries, International Financial Reporting Standards is used. (Bannister) The double accounting work is extensive as well. An example would be IFRS not recognizing LIFO as an acceptable inventory system. If the cost of a product is increasing, using LIFO saves a company money because a higher cost against gross income results in less taxable income. If a company using LIFO needed to report internationally now, any financial statement involving inventory would have to be reevaluated to satisfy IFRS. (Intuit Team) This double accounting causes an additional disadvantage other than just doing more work for United States accountants as well.

Accountants who studied in the United States are taught how to satisfy GAAP when doing financial reporting and the CPA exam certify them to do that. They are not however taught to satisfy IFRS principles, so they may not being preparing the best IFRS-satisfying financial statements. This is bad for the company reporting the information because it may not be the best reporting it could be for the company. It is also detrimental to all United States taught accountants. In an ever globalizing world economy, accountants taught to satisfy only one countries accounting rules is less valuable than an accounting who can satisfy accounting principles in over 100 countries.

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Tax Accounting

Accounting is the recording, interpretation and reporting of financial transactions. Each and every business must keep proper record of all such transactions. There are several branches of accounting such as financial accounting, managerial accounting and tax accounting.

Whether your business is a sole proprietorship, partnership or corporation, business men must file an income tax return and pay income taxes. Proper recording and accurate tax return will be beneficial in maintaining proper reputation of business and on the other side, poor records may result in underpaying or overpaying of taxes. It means recordkeeping will directly affect the tax return policy.

In simple we can say that Tax Accounting is important for complying with tax laws as well as for minimizing tax expenditures.

Most taxpayers dread tax season all year round and for those who understand the process, filling taxes seems a tedious task. But for others it becomes a confusing ordeal. A tax accountant plays a vital role in the formation of a business. Tax accountants are responsible for maintaining proper record. They tend to offer a broad range of services, from budget analysis and asset management to investment planning, legal consulting, cost evaluation, auditing services and many more.

Tax accounting will cover financial planning services, litigation consulting services and managerial advisory services. The tax accounting group provides a wide range of tax compliance, planning and consulting services to individuals, business firms (including partnership and corporations).

There are several income tax software programs available on the market for completion of yearly taxes. TaxACT software is available in online, download and CD-Rom form. TurboTax software offers an online or a software package for personal or small business tax preparation. The software can be downloaded or provide by CD-Rom. TaxSlayer software can be used online or downloaded. There is no charge for the web version however there is a small efile fee for federal taxes. TaxCut income tax software is developed by H & R Block, is ideal for simple returns.

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What Is Finance and Management Accounting and How Do They Differ?

Accountant professionals are the ones who perform accounting tasks for a company or an individual. Accountants have a host of duties to perform like some of the accounts may deal in company’s financial statements, while others may work closely with organization’s management matters related to budgets, analysing the cost of the products, services and operations. Some may work in auditing while others work as independent accountants like Certified Public Accountants (CPA’s), who carry out auditing for more than one company. An accountant can be regarded as a primary figure as they are required in every business, whether it is a multinational, small firm or self-owned business.

What are the different types of Accounting?

Accountancy is a vast field, which keeps on evolving. Over the past few years, accounting has expanded manifold, catering to the varied requirements of the businesses and has branched out in different types-

· Financial

· Management

· Tax

· Forensic

· Project

· Social

In the following paragraphs, we will take a closer look what is financial and management accountancy and how do they differ from each other.

What is Financial Accounting?

It is a process of determining, summarizing and reporting a number of transactions from a business to bring forth the correct financial situation and performance of an organization. This field primarily deals in preparation of financial statements in the form of balance sheets, income statements, expenses and record of cash flow. Financial accounting is carried out to present the financial health of an organization to its external stakeholders, Board of Directors, creditors and other investors. The reports are time specific in order to depict how the company has performed. In a nutshell, financial accounting caters to an audience which is outside an organization.

What is Management Accounting?

Managerial or management accounting is a field of accounting, which aims at providing financial information within the company in order to assist the managers or management in planning, controlling and decision-making. It does not use the past data; in fact it is based on the present performance, future trends and challenges. The information/report produced is usually more particularized in comparison to external usage. This is done so as to enhance and optimize matters related to finance thus aiding in the accomplishment of the company’s goals and objectives.

What is the difference between financial and managerial accounting-

The primary difference between both the types of accounting is quite evident, that management accounting is presented internally whereas financial accounting caters to external stakeholders. Both have significant importance of their own position. Financial is vital for existing and potential investors, while management is crucial for managers to make current and future decisions.

The differences can be listed through the following categories –

Optional-Financial reports are legally required, whereas managerial are optional.

Format– The report in financial accounting specifically follows a particular format, whereas managerial formats are informal which varies company to company.

Proven Information-Financial reports are kept with utmost precision which is needed to support that the financial statements are correct. Managerial accounting is more about estimates and research data rather than proven records.

Focus-Financial accounting is primarily based upon past data, oriented towards creation of financial statements which is to be distributed within and outside the company. Managerial accounting is mainly concerned with operational reports focussing on the present and future requirements.

Owing to its high demand in the market, Accountant jobs in both the fields are available in abundance. People working as accountants are well-paid and on an average they earn between the range 2 to 3 lakhs per annum.

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Why A Certified Public Accountant Is Worth Every Dime While Accountants Are A Dime A Dozen

Most small to medium size businesses quickly get to the point where they realize they need an accountant who is versed in everything from tax preparation to financial planning. When they can no longer handle all of the financial work themselves, they start shopping for a bookkeeper to help them with the complexities of their finances. Some companies opt for a generic bookkeeper while others hire a CPA, assuming that the difference between the two is more a matter of cost per hour for their services than any difference between the services they offer. In fact, there are numerous differences between them that make a Certified Public Account well worth every dime you spend.

Anybody Can Be An Accountant

And that does mean anybody. There are no federal or state guidelines a person has to meet before they can hang out their shingle as an accounting specialist. In fact, the very definition clearly allows anyone who is interested in doing the books to advertise themselves as an accountant, which is simply someone who looks after the financial records for a business or organization. If you work with figures, you can use the title without having to get a college degree, take a test or ensure that you understand finances. If you can use a calculator and are familiar with basic accounting software, you can be a bookkeeper for any company willing to hire you.

A CPA Has To Prove His Or Her Qualifications

You can’t, however, simply put up a sign and be familiar with bookkeeping to be a Certified Public Accountant. The certification process is a stringent one. You have to take a series of tests and pass them with the appropriate score in order to be allowed to refer to yourself as certified. In the state of Illinois, there are no fewer than four exams required and you will have to pass every one of them. Rigorous testing ensures that everyone who passes has been properly trained. What does that training entail? In most states, it means you’ve been to college and obtained the appropriate degree.

Education Is Critical

Even though someone has spent years as a bookkeeper, if they don’t have the educational background, they can’t call themselves a CPA if they haven’t completed at least 120 semester hours of the appropriate credit courses from a recognized educational institution. The courses have to include business law, accounting and auditing, with a focus on accounting.

Keeping Current Is Also Vital

Keeping a CPA designation can be as difficult as getting one because there are strict guidelines for maintaining certification. Anyone who is a CPA has to complete at least 80 additional hours of continuing education every two years in order to stay current on the constantly changing laws and regulations surrounding business accounting practices.

Will you pay a bit more to have a Certified Public Accountant work for your company? Yes, but you’ll soon realize that his or her knowledge, training and experience are valuable assets that will save your company a great deal more in terms of peace of mind and the best possible financial decisions for you and your business.

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IFRS and Globalization of Accounting

In 2002, The International Accounting Standards Board (IASB) created a new standard for financial reporting known as the International Financial Reporting Standards. These new standards made an effort to bring the accounting and financial reporting throughout the world together. The IFRS is attempting to globalize the accounting and financial world by having a set of standards that allow investors in different countries understand the financial records and make an informed decision on whether to invest or to not invest. With markets becoming more complex, easing the analysis of financial records is a necessity so that the market can have the most accurate price for stock, bonds, or any other financial investment.

Globalization is occurring more rapidly than ever before, with the communication systems that are available. The market truly never sleeps, companies have interests in other countries and have the means of knowing the current price of their investments. The IASB amends the IFRS when they see fit. The newest amendment was announced on December 8th, 2016 and to take effect for annual periods beginning on or after January 1st, 2018. This allows companies or countries who use the IFRS time to adapt to the changes. Although some countries have their own set of accounting standards, they still will use the IFRS for investors in different countries because the financial reports will be in a readable format that international investors will understand.

The United States has their standards for financial reporting, Generally Accepted Accounting Principles (GAAP), some companies will also use IFRS to display their reports and for their affiliate companies in other countries. This will help companies save money on keeping just one set of books for only one way to record their transactions. Companies can now expand easily into other countries because they can learn the IFRS methods and apply them to their current business. The IFRS has many different standards for different categories, such as bookkeeping, financial statements, accounting standards, and auditing.

Companies today can easily grow and expand past their own country’s border. Companies go into other countries, whether that be to sell their products or service or to have their products produced. Globalization helps spread the ideas between companies, an employee in Europe could have an impact on an employee in America. Globalization is leading helping technology grow at the rate it is currently growing at. With better technology producing products becomes more efficient, times of delivery become more accurate, communication would be faster, and research and development would lead to new products quicker. Globalization has impacted nearly everyone on Earth, and will continue to grow and expand the global economy for many years to come.

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