Role of Accounting in Business | What is the Role of Accounting in business?
Accounting in Business
Accounting is often termed as the language of businesses. Accounting in business plays a vital role as it provides so much information about the company which helps to evaluate the company’s financial performance. The role of accounting in business is to help the stakeholders make better business decisions by providing them with correct financial information about a company. More importantly, the Role of Accounting in business is to make sure that the stakeholders understand the meaning of financial information, and they work with both individuals and organizations to help them use financial information to deal with business problems. Collecting and entering all the numbers and making the data is an easy part. The harder part is analyzing, interpreting, and communicating the information.
Is Audit of Accounts Mandatory in UAE?
In the United Arab Emirates (UAE) Audit of accounts is mandatory for some forms of entities in the free zone like the free zone companies (FZCO) and free zone establishments (FZE), for a branch of local and foreign company. In order to finalize the audit, it is obvious that the accounting records and documents should be available and well maintained. In UAE the general requirement for a business is to maintain their records for no less than a period of five years hence, the Role of Accounting in business plays a major role. The Commercial Companies Law states that the audit of accounts is necessary for all companies in the mainland.
Generally, though the law stipulates the preparation of the audit report, the submission of the same is not enforced by the authorities and hence many organizations do not follow the same. Some free zones, particularly in the northern emirates of UAE do not require the submission of audited accounts for certain companies.
The maintenance of accounting records will become more important for nearly all kind of entities in UAE as per Article 78 of VAT Law 2018 and Article 71 & 72 in Executive Regulation. Companies in the UAE have generally a time period between 3 to 6 months after closing their financial year/period to complete the audit report and submit to the Authority. The Role of Accounting in business while maintaining accounting records and audit of same also assists the management to understand the performance of the company and areas which need more attention.
What is the Importance of Accounting in business?
To know about the company’s performance, we must record all the transactions. We can also opt for any accounting software based on our requirements which are readily available in the market nowadays. For example, if you are a trading company, it is better to buy the software which is integrated with the inventory.
Inventory management will play a vital role as far as a trading company is concerned. With the accounting software, you can check the inventory level at any point in time. The Importance of Accounting in business is to help us monitor inventory leakage, Stock levels, etc. The accounting software will support us with product costing, project costing, inventory management, Accounts receivable Ageing, Accounts Payable Ageing, etc. It will automatically generate the Profit & Loss Account, Balance Sheet, Cash Flow statements, etc. With the support of the software team, we can customize the software based on KPIs and it will help for the MIS Reporting.
The Accountant/Person in charge for the accounts department must know the basic accounting principles, Accounting policies and procedure, IFRS and the local laws about that industry / Company. For example, in the case of the construction industry, the owner may need information about a project. So, the accountant must enter the data based on project accounting. The Role of Accounting in business is to maintain WIP Control account to know the status of Invoicing and the project progress. He should account material related to that project, Labor Salary, etc. to that particular project through project accounting. He should know pre-costing and post-costing techniques to identify the variances etc. He should find it in advance before it slipped off from our budget. So, the maintenance of Books of accounts is not a simple task. We should require an accountant with sound knowledge. Then only it will help you to manage the company without any issue. Maybe your supplier/customer may ask the SOA then you have to provide it. Maybe your banker may ask some information related to the company then you should be in a position to provide it. To monitor the bank balance and to do the Bank reconciliation you have to maintain proper books of accounts.
How can Emirates Chartered Accountants Group help to take the Role of Accounting in business?
The vast expansion of businesses in the UAE has been taking place at a rapid pace and the legal requirement to maintain proper books of accounts make the Role of Accounting in Business more competent. To keep up with this rapid pace of expansion of your businesses in the UAE, it is sometimes difficult to manage the accounting activities of their businesses on their own especially for SMEs. Hence, to take up the role of accounting in business and serving the business in UAE, we provide the below Accounting Services in the UAE.