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Accounting is as ancient as man’s attempts to transact with fellow human beings. With the predominance of money measurement in economically useful activities, accounting became the most vital tool. At the center of all accounting principles is the urge to ensure accuracy and consistency. This takes the form of double entry system of accounting. The 15th century Italian mathematician, Frater Luca Pacioli, first extolled about the features of the system.

Double entry method offers a convenient and accurate format for recording transactions. Put simply, all transactions have two aspects. Therefore, omissions or numerical errors would automatically stand out. Thus, it acts as a self-correcting mechanism.

The basic aspects of accounting relate to correct classification of transactions. There are four major accounting heads: assets, liabilities, revenues and expenses. At any given point of time, the firm’s assets should equal its liabilities. This is the accounting equation. If they do not match, there is an apparent error in the accounting process.

The enterprise’s assets represent the productive resources used by it. Plant and Machinery, building, stock of raw materials and stores, debtors or accounts receivables, cash and bank balances are some of the assets. Liabilities are the sources that finance the assets. Owner’s capital, long-term loans, short-term bills, sundry creditors and other financing are the liabilities.

When revenues exceed expenses, the firm makes a profit and in the reverse it is a loss. Ultimately, profit or loss reflects in the financial position or the values of assets and liabilities on the given date. An increase in assets or decrease in liabilities means profit and decrease in assets or increase in liabilities mean loss.

Profit is the driver in any business enterprise and no wonder entrepreneurs seek to maximize it. More critical than profit is the measure of profitability because the latter reveals the firm’s efficiency in utilization of financial resources. Return on Investment is the most common profitability ratio. The claim over profits of a business depends on the organizational type. In ownership or partnership firms, the owner or partners have total claim over the profit. In joint stock companies, the stockholders are entitled only to the dividend as declared by the board of directors.

The work of an accountant is crucial as he reports the performance of the enterprise to the management and the owners. Based on the figures supplied by him, important decisions like capacity expansion, make or buy, retaining or hiving off unprofitable lines of business and employee incentive computation are taken.

The recent increase in media interest in personal identity theft has provided a reminder that company identity theft at Companies House is still a major problem for UK limited companies. These companies are being encouraged to proactively take action to deal with company filing fraud at Companies House. There are over two million company records held by Companies House which currently reports that of the five hundred thousand documents filed at Companies House each month, including company accounts, approximately fifty are identified as false.

Company hijacking at Companies House can involve:

The company directors are changed - Fraudsters file change in company director forms 288 to notify Companies House of a change to the company’s officers. These will either be stolen identities of real people or completely fictitious individuals pretending to be a company director. They will also notify Companies House that the company’s true officers have all resigned.

The companies registered office is changed - Fraudsters file a form 287, signed by a bogus company director, to change the company’s registered office to an address of their choice at Companies House. Once this is done, any communications from Companies House will be sent to the company at the new registered office, ensuring that the company itself doesn’t receive notifications from Companies House of any future changes.

Supporting documentation may be obtained - The fraudsters notify Companies House and effectively have the company under their control as far as third parties are concerned, as they appear to be the legitimate company directors. In order to give credibility in their subsequent dealings with third-parties, the fraudsters may request, for example, a Certificate of Good Standing from Companies House. This official document then confirms the status of the fraudsters as being the company directors.

As far as third parties are concerned, the fraudsters appear to have gained control of a company and appear to be the geniune company directors. This can include obtaining supporting documentation from Companies House and then approaching suppliers of high value, easily disposable, goods and placing orders apparently on behalf of the company, with delivery being made to the company’s “new” bogus registered office, which the fraudsters can obviously access.

In another case, the owner of a business was surprised to discover that the registered office of his family business had been changed from the address at which it had been located for the last hundred years. Even the company’s nameplate was stolen from the building where it was located.

Since April 2005, identified instances of company filing fraud seem to have leveled off below the peak, but are still at a relatively high historical level of approximately fifty incidents a month. The Metropolitan Police agree that a single filing fraud could cost £1 million and could very seriously damage the victim business.

One large part of the fraud is that the company itself doesn’t discover the changes at Companies House until the fraudsters have had time to complete their scam and then disappear.

Other frauds include setting up bogus companies, falsely adjusting company accounts and even stealing the identity of the auditor to ensure that these company accounts appear to be credible. A credit agency has recently revealed that nine auditors have had their details taken to approve a false set of company accounts over the last nine months. Another hundred sets of company accounts have been set up using completely fictitious auditor details over the same period.

Companies House now offers a protected on-line filing scheme (PROOF) where only mutually approved documents, including company accounts, are registered. Companies are also advised to use an online monitoring service advising companies each time a change of record has been made.

It is highly likely that the new Companies Act will create a new offence under which a person who knowingly or recklessly delivers or causes to be delivered to Companies House a document, including company accounts, that is misleading, false or deceptive in a material particular, will be liable to imprisonment for up to two years, or a fine, or both.

Are you stuck up with the overload of work related to tax calculating? Then it is the right time to opt for outsourcing services that are being offered to accounting firms. Everybody likes to lessen work burden because you have to pay attention to each and every part of your task carefully. With the excess of workload, you may make mistakes that can drive you towards losses. And nobody is here to make losses, rather to earn huge amounts of profits in the field of business. The concept of accounting outsourcing is all about giving some part of your work or the entire one to an outsourcing company that will do the best work for you.

Everyone is aware of the fact that accounting outsourcing saves a lot of your money. Mainly, it is because of this reason that the outsourcing services are frequently sought after. As far as outsourcing is concerned, the saved money can be invested to boost any other department of your business that is on the losing end. Many a times, it happens that the accounting firms suffer huge losses due to their inattentiveness to other sectors of the business. In this case, accounting outsourcing proves to be a boon for your business.

Accounting outsourcing ensures better quality of service. It is because the firms that are handling outsourcing services concentrate thoroughly on the accounting work only. Many accounting firms or big business houses outsource various accounts related tasks, such as invoice generation, generating accounts, financial statements, trial balances, profit and loss account, pay roll processes, checking credit card accounts and lots more. Outsourcing is highly beneficial for you as it saves money that would have been wasted in hiring a proper staff for managing such accounting tasks.

The accounting outsourcing companies understand the need of getting things done at a faster speed. Such outsourcing companies are a blessing in disguise for those accounting firms and big business houses that are unable to manage their work. You can even monitor your work done by your outsourcing helpers. The information can be posted to the server in your company and this will let you keep a track of the efficiency and quality of work. The main aim of this service is to save you from problems that may crop up during tax sessions.

Tax session is the ultimate time that everyone gets tensed. It is because, if you are not able to file the tax on time; you can land up in big problems. Mainly because of this reason that outsourcing services are seeked from the other companies. Accounting outsourcing service has become mandatory for the over-burdened accounting firms. The professionals with outsourcing companies are skilled enough to manage the tasks properly and complete the work on time. After all, they understand the need of making good client relations.

Outsourcing of payroll processes simply means that you transfer this traditionally in house function to another company. All of the tedious duties involved with payroll processing are shifted from the company itself, allowing more constructive use of staff time.

Once a firm entrusts its payroll processing to a reliable outsourcing company, they can be assured that not only will all the payroll be taken care of, but expert advice will also be available. The costs of setting up your own payroll systems, which include software purchasing, maintenance and upgrades is avoided. Using payroll processing outsourcing avoids many issues such as penalties, salary calculation errors and claims.

There are many payroll processing outsourcing firms to choose from. Make sure the company you decide to work with has the right experience in your locale and that their references are impeccable. A company can make a comparison of the methods of various vendors.

In addition to payroll processing, payroll outsourcing companies will provide the necessary accounting reports. Accounting data can be very tedious for companies to put together. In addition, there is a certain amount of risk around accounting reports since audit usually uses such reports. The last thing you want to take a chance with is messing up your audit data and getting yourself in trouble in that arena. Outsourcing payroll services added that extra benefit and piece of mind that your accounting data and reports is accurate. Outsourcing payroll services provides this extra piece of mind. All data time capture and entry must be documented, and the company should provide round the clock help for employee assistance.

The lure of an economic solution for a tedious and time consuming chore should not be over shadowed by carelessness. It is imperative that the provider of these services can provide the maximum security to its clients through the use of encryption technology and password protection.

There are so many attractive benefits besides costs savings of payroll processing outsourcing. Increased productivity, employee satisfaction with online assistance, avoidance of late taxes and penalties are just a few additional benefits that add to the attractiveness of payroll processing outsourcing. Best of all, a company may avoid going out of business by incurring a cheaper, more efficient system of operations through outsourcing. What better benefit could there be? If a companys competitors are outsourcing do to cost reasons, most likely they should outsource alos to ensure they can stay in business and compete.

If you are in a growth mode, perhaps your business is only a few years old and you are trying to establish yourself in the local market, then your measurements will focus on growth.

Before you can measure your growth you need to be clear about where you are now and where you hope to go. What size is the market? Have you targeted a certain geographic area? Or perhaps a certain channel, like hair salons for your handmade moisturizing products.

Whatever the growth goals are, you can develop a system for tracking your progress. Let’s take a look at Carls’ Candles and the managerial accounting system he has developed to measure his growth.

Carl has been making container candles for three years now. At the current prices Carl has been able to increase sales year over year. But the growth rate has slowed and last year he only grew his sales revenue by 5%.

The market for container candles is growing and the distribution outlets are numerous. Carl has been marketing his candles direct by selling through independent retailers and small gift shops in the area.

Carl sells to the retailers at $3 per candle. The direct costs for each candle are $1 and the overheads are $4,000 per month. In Carls’ overhead budget he includes his own wages, electricity, and insurance. The direct costs include soy wax, containers, fragrance, wicks, and delivery.

Break even for Carl is $3 minus $1 divided into $48,000, or 24,000 candles per year. For the last three years Carl has sold 26,000 then 30,000 and 31,500 candles each year. Carl wants to develop a pricing program that will help him to stretch out into new areas like wholesale distribution.

If Carl keeps his price the same for all his customers he won’t be able to offer a lower price to the wholesalers. But if Carl drops his price to the wholesalers, below the $3 per candle, then he would not be making enough profit. What can Carl do?

Using managerial accounting, Carl has listed out the raw material costs for his candles.
$.45 Soy Wax
$.05 Glass Container
$.01 Wick
$.15 Fragrance
$.44 Delivery
$1 Total Direct Cost per Candle

Carl can offer the same candle to a wholesaler at $3 minus 44 cents for delivery, which equals $2.66 per candle. Will this be enough to increase his sales volumes? Carl puts out a flyer and mails it to all the local wholesalers. His sales increase because now the wholesalers can distribute many more candles than Carl.

But Carl tracks the sales and notices an increase in his wholesale shipments but a decrease in his retail sales. What has happened? The wholesalers are now shipping his old retailers direct. So Carl is selling more product at a lower price. In this simplistic example you can see how managerial accounting has helped Carl make decisions about his growth oriented pricing strategy.