Accounting is something that probably everyone has heard of but not everyone truly understands. It can be said that accounting is one of the main prerequisites for successfully running a company and has several functions. First, it serves as a source of information for the inner members of the company who thus know how to lead the company in their respective field. On top of that, financial statements may be useful for external lenders or potential investors who are interested in investing in the company. Furthermore, financial statements, which are generally publicly viewable by law, may serve various government agencies for the purpose of carrying out necessary audits but also the public which has the opportunity to become familiar with the company and its inner structure.
How Can an Accounting Firm Help You With Your Accounting?
Accounting firms exist for the purpose of improving the quality of other firm’s or entrepreneur’s accounting, making the accounting easier and simpler for them or even advising them on how to do accounting properly. When looking for a quality accounting firm to assist you with your accounts, it is best to seek an established firm with proper reputation and some history. Such an accounting firm is likely to be able to provide you with high-quality accounting services. These kinds of firms offer even quite complex and intertwined services including taking care of accounting along with preparation of tax documentation, documents relating to employee wages, etc. In many cases they can also help you with preparing the required documentation associated with health and social insurance obligations and the firm’s employees may offer you to represent you during a specific type of procedure such as tax procedure.
Cash and Accrual Basis of Accounting – What Do They Stand For?
Basically there are two methods of accounting. First is called cash basis of accounting and the other one is accrual basis of accounting. In the first case, the financial transactions are recorded at the moment when there is an exchange of money between two transacting parties.
In the latter case transactions are recorded at the moment when they occur. Therefore accrual accounting includes transactions in which there has been no exchange of money so far as in the case of hire purchase, etc. Conversely, these types of transactions are not recorded when the cash method of accounting is used. In fact, they are not recorded until the moment when an actual transfer of money occurs. Generally larger companies take advantage of accrual accounting and smaller ones tend to use cash accounting.
Management and Financial Accounting – What’s the Difference?
Management accounting is done for the purpose of company management – it serves the company itself for it to be able to organize its operation well and adapt to external influences. This type of accounting therefore records internal company costs and allocates the costs of producing goods or services, which are manufactured by the company. Thanks to management accounting we can predict the future development of the enterprise and form a budget for expenses. In contrast, in the case of financial accounting financial statements are created based on financial information available to the company. Based on financial statements potential investors make decisions as to whether or not to invest in the company.
It can be said that management accounting is carried out mainly for the purpose of allowing the members of the company to perform inner business decisions well, while financial accounting is used to allow people outside of the company, such as investors, to make justifiable decisions.
Accounting Standards and the Situation in Singapore
Generally we can say that accounting standards are a set of principles based on which are issued accounting or financial statements in a given country. The main purpose of these standards is the recognition, measurement, presentation and disclosure requirements for transactions and situations that are important for the production of financial statements. Not too long ago principles differed from country to country in connection with the fact that each country had a different economy, a different religion and in every country different socioeconomic factors played a role, their legal systems were different, etc. In the era of globalization of the world economy, however, there is a need to develop accounting standards in the international field for more than one state at once. This is also associated with the increasing number of companies, as well as an increasing number of offerings on global stock exchanges.
Today there are so-called IFRS (International Financial Reporting Standards), which are issued by the IFRS Foundation, an organization that deals with the development of accounting standards in order to harmonize accounting practices. Although the IFRS are quite complicated and long, they are definitely reliable. Within Singapore the official accounting standards are referred to as the Singapore Financial Reporting Standards (SFRS) which are mainly based on the above mentioned IFRS. All companies with accounting periods beginning on or after January 1st 2003 must comply with SFRS. The SFRS includes a total of 39 financial standards, each of which is referred to as a single FRS and relates to a particular topic which is different than any of the others.
It can be said that standards are becoming increasingly complex. For this reason, it is appropriate to create an alternative for smaller companies for which the use of the same standards as large international corporations is rather meaningless. For this purpose, in 2009 were created so-called SFRS for SMEs which is short for Singapore Financial Reporting Standards for Small and Medium Size Entities. It was definitely a step forward, because in Singapore, most companies are SMEs (Small and Medium Size). Smaller companies whose financial year starts on January 1st 2011 or later may voluntarily join the SFRS for SMEs system.
To enable a company to join this system, the company must be qualified and rated as a small company in Singapore. Therefore, it must meet the following requirements: it must not be publicly accountable, it must publish financial statements for external users, its total annual turnover must not exceed $10 million, the total value of the gross assets must not exceed $10 million and the total number of employees must not exceed 50. Generally speaking, it is a step forward, because now smaller and midsize companies do not have to be in compliance with the same standards as the giant corporation, while transparency, quality and reliability is ensured.
Categories: Accounting & Payroll Services in Singapore