The single biggest positive impact that accurate accounting can have on an organization
In cost accounting, accountants have the role of planning, designing, and controlling strategies that assist in making quality decisions on costing, pricing, budgeting, inventory management, and profit management. Other than operational decision-making, they are expected to come up with policies that ensure quality and quantity in a company has been attained. They use accounting tools to offer sound information that can be used to change or improve production; for example, they use accounting tools to come up with cost-effective policies.
When producing goods, accountants have the role of budgeting the available materials; they make different budgets types like sales budget, purchases budget, raw materials budget among others. To control costs, they use cost analysis tools like cost-volume-profit analysis, Job Costing and Activity-Based Costing to offer sound information to the manufacturing units for an effective and efficient operation.
In the modern business world, there are new concerns that the best approach to making financial gains is not necessarily to increase sales but also manage costs; accountants have the role of coming up with such moves that can control the cost of a business. The practices accountants engage in include human aspects of budgeting, timely coverage of budgets, financial planning models, and the development of kaizen Budgeting. As accountants perform their tasks, they get an effective pathway that can be followed by the business for optimal use of resources and offering high-quality products or services.
Identify and discuss five best accounting practices that should be applied to any business
Accounting whether in small scale or large-scale business have some best practices that they have to follow they include:
True and fair
Financial statements by accountants should offer an objective view of the business situation; they should not be manipulated or adjusted to fit certain interests; for example, budgets should not be exaggerated for the benefit of say the contractor or other interested party. True and fair accounts assist both internal and external users of accounts to make informed, quality, and timely decisions.
Accounting information is used to make crucial organizations’ decisions, they need to be as accurate as possible; accounts should be accurately made in format and arithmetic; they should offer an accurate and fair view of the situation and should enhance complete and fair accounting.
Some costing and pricing information should be a secret of the firm especially if competitors can use them; accountants should then ensure that information only get to the right people.
Accountants should be independent of any influence; this means that they offer information about the situation the way things are in an organization; the information should portray some independence and no influence from internal or external influences.
Competence and complete
Accountants should be competent and have had quality education, skills, and experience for proper accounting practices; when they are competent, they are able to produce up-to-standard accounts and are willing to make good use of their expertise for making accurate and fair accounts.
Identify and discuss five common mistakes that organizations make in regards to accounting
Organizations in the course of operations make some mistakes as far as accounting is concerned, the most common ones are:
Failure to maintain correct records
The accounting profession require that every transaction and operation within an organization be documented for accounting purposes, however many are times that some transitions go unrecorded; the final effect is incomplete accounts or accounts that are not offering a fair and accurate position of a business.
Failure to track systematically overdue invoices
Some accounting practices are challenging to follow; for example, the accrual accounting system is challenging to an organization. Because of the challenges, some organizations have failed to comply with the set standards of accounting resulting in accounts that cannot be relied upon.
Failure to deploy professionals and experienced accounting experts
Accounting professionals are expensive to maintain, most organizations shy off from the expense and end up employing people who are not well equipped with the professionalism required in the field; when this happens, the accounts produced fail the test of being fair and accurate.
Lack of accountants independence
Although accountants are a company’s employees and should work for the good of the company, they need to work independently; managers, shareholders, or even other outsiders should not influence them; this has been a challenge in many organizations as accountants suffer external influence.
Lack of continuous training of accountants
The accounting profession is fast changing; there is a need for accountants to keep improving their skills to match the current needs of the profession. Some organizations fail to invest in their human capital through improving their skills through training and other developments (McCartney, 2004).
In the cost accounting field, there are some new ways that accountants need to be informed in, for example, fixed-cost/variable-cost structures, operating leverage; effects of sales mix on income, and multiple cost drivers are coming up as new areas that accounting input is required, those companies that fail to offer such training are bound to have inefficient accountants.
Discuss what steps a new accounting hire could take to help an organization avoid the common mistakes just identified
New accountants can assist a company to avoid common mistakes in accounting, to do this there are some steps that they should follow to ensure that professionalism is maintained in the sector the following are the steps to follow:
- Organize the accounting department in such a way that every accountant irrespective of his or her responsibilities can be held accountable for his or her actions, for example, the accountants responsible for cost-volume-profitt analysis should be held accountable for their advise to the top management
- Hold training and negotiation meetings with accountants and the management to discuss the best approach to costing, pricing, budgeting, and the use of technology by accountants
- Enact policies that will see upholding of international costing and pricing accounting standards; this will avoid any chances of manipulation of accounts that might mislead an organization
- Find the underlying cause of the problem and ensure that processes are operating most appropriately; controlling of information should be first on the list. The problem or the malpractice that exists in a certain company should be the guiding principle to ensure that the right decision has been made on the approach to rectification of the problem.
- Enacting appropriate internal controls; internal controls are both strategic management tools as well as accounting tools; when well implemented, they assist accountants perform their duties diligently and be held accountable (Atrill & Jenner, 2009).
Accountants form an integral part in a production process; they have the responsibility of developing effective cost management processes and strategies. They make use of cost control or management tools like budgets, break-even charts, cost-volume analysis, and activity-costing methods to advice the manufacturing departments. After considering the inputs incurred in a process, they develop the most appropriate pricing model; pricing model ensures that all the costs have been covered and the company gets a profit margin from the sale.
Atrill, M. H. and Jenner. (2009). An Introduction: Accounting 4. London: Pearson
McCartney, J. (2004). Accounting: A Framework for Decision Making (Book). Pacific Accounting Review. Pacific Accounting Review Trust, 16(1),77-80.