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In today’s fast-paced business environment, many companies are increasingly turning to outsourced accounting and bookkeeping services to streamline their operations. Whether you are an independent contractor or setting up your business in India to scale up, keeping accurate financial records is crucial for long-term success. With evolving technology and the complexities of modern finance, handling accounting in-house can be time-consuming and costly. This is where outsourcing comes into play. In this blog, we will learn about bookkeeping and accounting, the different types of accounting, and why more businesses are choosing to outsource these services.
Bookkeeping (and accounting) is the systematic recording of financial transactions, including sales, purchases, receipts, and payments. It forms the basis for preparing financial statements, tracking income and expenses, and ensuring compliance with tax regulations. It helps maintain accurate records of financial transactions for future reference.
The term bookkeeping means different things to different people:
Once bookkeeping is in place, the accounting process steps in to turn these records into usable financial statements. This will be used to summarize data, analyze trends, and generate reports such as balance sheets and income statements. In essence, accounting not only guarantees compliance with regulations but also gives insight for decisions on budgeting and strategic planning and, ultimately, helps a business determine its financial health and reach goals.
Once bookkeeping is done, the accounting process steps in to turn these records into usable financial statements. This will be used to summarize data, analyze trends, and generate reports such as balance sheets and income statements. In essence, accounting not only guarantees compliance with regulations but also gives insight for decisions on budgeting and strategic planning and, ultimately, helps a business determine its financial health and reach goals.
Accounting refers to a very systematic method of recording, analyzing, and reporting financial transactions with an organization in order to convey an exact picture of its health. It has direct involvement in statements of a balance sheet, an income statement, or even the cash flow statement to sum up the business’ entire activities over a given time frame. The goal of accounting is to increase the information flows for stakeholders, which include mainly the management, investors, and regulators, to assist profitability, liquidity, and general financial performance. Besides this, it fulfills the legal and regulatory requirements, thus acting as an essential tool for effective financial management and planning.
As we understand above, bookkeeping (and accounting) is the systematic recording of financial transactions. Accounting is a vast and dynamic profession and is constantly adapting itself to the specific and varying needs of its users. Over the past few decades, accountancy has branched out into different types of accounting to cater to the diversity of needs.
Here below, we explain different types of accounting:
Financial Accounting, referred to as financial reporting, is the process of developing information for external use and, in most cases, appears as financial statements. A reflection of an entity’s past performance and current position in terms of standards and guidelines, financial statements depict past activities and the present condition according to a set of rules or guidelines. GAAP represents the standard framework of a guideline for financial accounting to be used in a specific jurisdiction. This includes accounting standards, accounting conventions, rules, and regulations, among others, that accountants should be guided by in preparing financial statements.
Management Accounting mainly focuses on producing information for the management of a company. The information produced is more or less detailed than the information prepared for external purposes. It would serve as an effective aid to organizational control while helping realize the strategic aims and objectives of the entity. Information can take the shape of budgets and forecasts, allowing a business to strategically plan for its future. It may also involve evaluations based on historical performance and outcomes. The format and details of any report generated during this process are entirely at the discretion of management.
Cost accounting is one of the important branches of management accounting, which employs several techniques for cost accounting to be applied to control and monitor costs. Its application is more suitable for manufacturing concerns.
Governmental accounting is also referred to as public accounting or federal accounting. The term refers to the accounting information system that is utilized within the public sector. There is a slight deviation here as compared to the financial accounting system used in the private sector. The reason for having an entirely different accounting system in the public sector is the distinct aims and objectives between state-owned and privately owned institutions.
Tax Accounting pertains to tax matters. Tax accountants are guided by tax rules stipulated in the tax laws of any given jurisdiction. Often, these rules differ from those applicable to preparing financial statements intended for public use. Tax accountants adjust the financial statements prepared using financial accounting principles to factor in these differences. Tax professionals then apply this information to calculate an organization’s tax liability and in tax planning.
Forensic Accounting applies accounting, auditing, and investigating techniques when litigation or a dispute occurs. Forensic accountants are frequently engaged in various types of litigation, including insurance claims, personal injury cases, suspected fraud investigations, and allegations of professional negligence related to financial issues, such as business valuation disputes.
Project accounting involves using an accounting system to monitor a project’s financial status through regular financial reporting. This process is crucial to effective project management and falls under the umbrella of management accounting. Its primary emphasis is on ensuring that company projects, such as new product launches, are financially successful. For project-focused businesses, such as those in construction, project accounting can provide a significant competitive edge.
Social Accounting, often referred to as Corporate Social Responsibility (CSR) Reporting or Sustainability Accounting, involves documenting the effects of an organization’s operations on its social and environmental surroundings. This type of accounting is typically presented through Environmental Reports that accompany companies’ annual reports. As a relatively new field, Social Accounting has emerged in response to increasing public awareness and concern for environmental issues.
Social accounting also includes ESG Reporting, which refers to the disclosure of a company’s Environmental, Social, and Governance (ESG) practices, policies, and performance. This reporting allows stakeholders—including investors, customers, regulators, and employees—to understand how well an organization manages risks and opportunities related to sustainability and social responsibility.
The demand for skilled bookkeepers and accounting professionals is higher than ever. The demand for good and qualified staff in financial reporting, compliance, and tax regulations in small and medium-sized enterprises has been very difficult to attract and retain. Outsourcing accounting refers to the process wherein you hire an external firm or professionals to manage your finances, from bookkeeping to accounting to business compliance. By outsourcing, businesses can comply with regulatory requirements while obtaining accurate financial reporting and insight.
Here are the Top Benefits you get from outsourcing your bookkeeping and accounting (also jointly referred to as accounting):
Effective bookkeeping is significant for the correctness of the financial records and supports the decision-making process of a company. If your accounting system is eating too much of your time, then you may hire an assistant to aid in some basic bookkeeping or hire or outsource to an accountant. Outsourcing your company’s accounting and bookkeeping can lead to precise outcomes while saving both time and money. This allows companies to tap into the expertise of professionals as well as state-of-the-art technology, which gives higher accuracy, efficiency, and cost savings.
Business owners can concentrate on the core operations of the business, create growth, and improve productivity in general. It follows that, in this manner, changing the financial paradigm may help to outsource accounting bookkeeping services to assure that such organizations gain better competitiveness with the capability for the development of new adaptations that they can meet accordingly and establish firm foundational finance as a pathway into a much more successful, long-lasting future.
At Mercurius, we assist our clients in bookkeeping, payroll, auditing, taxation, secretarial compliances, and preparation of financial statements, ensuring compliance with applicable standards. If you have any questions or wish to know more about bookkeeping and accounting, kindly contact us.
