As we all know, the accounting system is an indispensable part of any business. It provides information on financial performance for both internal users (like managers, directors,…) and external users (investors, bankers,…). Because of this, accounting activities in an enterprise include 2 types: management accounting and financial accounting.
It is a process including gathering supporting documents of economic transactions occurred in the enterprise, processing them, reflecting them in the accounting system, and then preparing financial statements in accordance with accounting standards. The mission of financial accounting is to provide financial statements which truly and fairly reflect the enterprise’s assets, liabilities, equities, and profit and loss in accordance with accounting standards for internal users and external users (the principal users including investors, shareholders, business partners, tax authorities, banks, local authorities...)
Financial accounting provides information basing on transactions that already occurred, therefore it has a high level of accuracy and reliability. In addition, it is because that information reflected by financial accounting must be based on accounting evidence and comply with accounting standards.
It is a process including gathering, checking, analyzing data, and provide useful information for the enterprise’s management teams to help them in internal management and decision making relating to investment and operation.
The mission of the management accounting is, through analyzing the financial accounting data and other related detailed data, to provide a closer and clearer look about the causes, features, and nature of costs, incomes, assets, liabilities,.. which were incorporated and accumulated through the enterprise’s activities.
The management accounting has a different characteristic that it does incorporate not only events that already happened but also events that are happening and will happen in the future. Moreover, information provided by the management accounting might be associated with specific units or divisions of the enterprise, therefore such information is quite flexible and adaptive.
Although the tasks of financial accounting and management accounting are different, they all provide useful information for the related users.
Basing on the enterprise’s accounting data, the financial personnel will manage the enterprise’s finance and the cash flow to make more profits and control risks.
Financial activities include reading financial statements, managing cash flows, analyzing profit and loss reports to estimate the balance sheet and cash flows of the business. When these reports show that the business is short of capital, the financial personnel will apply finance tools to make a strategic plan to help overcome the shortage.
Based on the balance sheet, financial activities will help answer the following questions such as:
Basing on the above questions, we can see that financial activities are about the decisions relating to investment, capital sources, profit distribution. The overall goal of those decisions is to help maximize the value of the enterprise.
Tax activities are an important part of the finance and accounting division of every enterprise. Hereunder are the main tasks: