All accountants are created equal?
The answer to this question is No. At the most basic level, the are 2 different types of accounting, let’s highlight the difference between monthly accounting and financial accounting.
Management accounting involves bookkeeping, payroll and tax. The month-end accounts are important so you can calculate your profit correctly. This gives an accurate idea if / that your business is on the right track and to allow you to look at certain aspects of your business that guide in your management decisions. When these reports are accurate and up to date, they often highlight areas of the business that are generating higher profit margins or even areas that are making less profit (or even a loss).
These calculations allow you to price your products and services.
This is important to make sure you are selling and buying at the right price. For example, you should have a good understanding of profit margins, because small changes in margins can have a large impact on profit.
Financial accounting (or reporting) provides an overall picture of your business at a certain point in time. This is mostly done at the financial year end. Financial accounts have to be “signed off” by a person qualified to do so. Depending on the size and structure of the business, this may be performed by an accountant or possibly a chartered accountant (CA). Either way, the person has to be an independent person who provides an independent review. Certain (larger or public) entities need to be audited. This has to be done by a CA who is qualified as an auditor with the relevant associations.
Having said this, small business owners might produce accurate monthly accounts, but they are actually just not qualified to produce the reports as required. Once these reports are completed, they are submitted to SARS to be checked that all is in order in terms of tax.
There are most sub categories in each. This can be difficult to explain. Most businesses will only need a financial accountant unless there is manufacturing of products involved.
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