Main Tasks of Business Accounting
Getting your head around business finance is not easy. To help you get started, here’s a list of the most important tasks of business accounting and their meaning.
Payroll: Based on detailed private information in personnel files and earnings-to-date information, the correct amounts of income tax, social security tax, and several other deductions from wages have to be calculated. NI contributions, PAYE payments, retirement and holiday pay have to be updated every pay period.
Cash inflows: All cash received from sales and from all other sources has to be carefully identified and recorded, not only in the cash account but also in the appropriate account for the source of the cash received.
Cash payments: In addition to payroll cheques, a business writes many other cheques during the course of a year to pay for a wide variety of items including local business taxes, paying off loans, and the distribution of some of its profit to the owners of the business.
Purchases and stock: Accounting departments are usually responsible for keeping track of all purchase orders that have been placed for stock (products to be sold by the business) and all other assets and services that the business buys. The accounting department also keeps detailed records on all products held for sale by the business and, when the products are sold, records the cost of the goods sold.
Capital accounting: A typical business holds many different assets called capital, including office furniture and equipment, retail display cabinets, computers, machinery and tools, vehicles, buildings, and land. Except for relatively small-cost items, a business has to maintain detailed records of its capital items, both for controlling the use of the assets and for determining taxes.