Accountants & Bookkeeping in Baltimore MD

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Next dilemma that has to be resolved: on the basis of which report to analyze the financial results of the company - accounting or managerial?

Traditionally, business value as a legal entity conducted according to the accounting (financial) reporting company. In the new economic conditions, in my opinion, these accounts can not meet, not only managers but also business owners.

If the supervisor is responsible for the result of industrial and economic activity, the controller - for "transparency" of this result
When required, except for accounting, and management has to prepare financial statements?

From the standpoint of the theory of financial statements of the company (ie a minimum of three "pillars" - a balance sheet, profit and loss statement, cash flow) is formed within the financial accounting system. What do you mean managerial accounting system? Do with it. However, in practice there are a number of "if", if that is recommended to build and use to analyze the financial performance of the company's financial statements, built within the framework of management accounting and reporting.

If the number 1: in contrast to the traditional corporate structures, where the owner - an external user, the existing organizational structure of the company owner is an internal user. In holding structures, so as not to lose control over complex business relationships within the economic chain, the owners often become the managing partner - are included in the guide parent and subsidiary companies of holding structures. This fundamentally distinguishes them from the role of the owners of "public" joint-stock companies, for example, the United States, who receive information mainly from the annual accounts (financial statements). It is well known that the main difference between managerial accounting from accounting is that the latter is oriented to external users and management accounting - on the inside.

If the number 2: there is a discrepancy in the assessment of business as a legal person and the whole economic chain. Current conditions for survival in the market are such that the sphere of management should not be limited to the legal framework for an enterprise as the economic chain of business wider or narrower scope of jurisdiction of one company. Management must focus on results and effectiveness in all stages of the economic chain, chain, or beyond, or much smaller scope of jurisdiction of one company. Owners interested in the result of doing business in general and he was not interested in that, for tax planning purposes, for example, this business is divided into a number of legal entities. You can, of course, a consolidation of the official accounting records of separate legal entities in the financial statements of business in general. But this is often hampered by the lack of agreed accounting policies, formalized procedures and techniques of accounting, time constraints, lack of adequate attention to accountants is the accounting rather than tax accounting.

If the number 3: The shift from cost-based pricing for the calculation of cost-based prices would require calculating the costs for the entire economic chain of businesses, not just the accounting costs of a company. Modern conditions of competition in the market are such that now the market rather than a separate enterprise dictates the price. To understand the success or failure of businesses, conservation price advantage management will be able to calculate, monitor and manage all the costs of business, from the design stage of the transaction and ending with the stage of collection of money from the buyer.

If the number 4: The owners of the company is more interested in achieving or failure to set the current target, rather than the actual amount received by the financial result. If you as the owner said that net profit for the month amounted to 20 thousand have. ie, it is good or bad? What is the usefulness of such information? Management (financial) reporting shows which activities in the public areas of the company will get more profit. Shown by its results, in fact, is not the net result, but more in fact shows the achievement or non-current target. For example, the calculation amortization and interest payments on loans extended to subsidiaries within the holding company, are based on management decisions. Accounting is the financial statements shows the value of profits that want to get in compliance with the law.

If the number 5: from the bulk of Accountants companies primarily focus on the preparation of tax reporting, as set out their duties. Over the correctness of the information they are criminally liable. This does not entice them to a creative approach to the processing of financial information, its interpretation in the form, which is convenient to see the leadership and the owner of the company. Accordingly, the accountant is very well versed in current tax regulations and ordinances, but they do not have the knowledge and skills, organization and management accounting at the enterprise. This orientation of reinforcing stereotypes in the psychology of accountants, set out years of practice back in Soviet institutions, the state acts simultaneously in two faces: how the fiscal authority, and as an owner, so the reporting is not divided. They are difficult to reconstruct their minds to work in new conditions, adapting existing methods and approaches to the specific needs of the company. This orientation also reinforce stereotypes of the company's management with respect to accounting and bookkeeping. You heard somewhere about the requirement for creativity, the chief accountant? The stereotype is that the financial statements are rarely used in the management of the enterprise. The criterion for the quality of accounting often is the absence of claims and penalties on the part of fiscal services of the state.

Another dilemma that has to authorize: on the basis of what accounting information - data accounting system or data management accounting system - to form management (financial) reporting?

Before considering ways to resolve the above dilemma right away that proceed from the assumption: the information system of accounting in the organization has two major subsystems - the system of management accounting and reporting system and accounting (financial) accounting and reporting. Obviously, one part of business transactions will be reflected in the same way in the accounting and management accounting, the other will require a different reflection on the reason for differences. In other countries adopted different approaches to interaction management and accounting of their separation of different chart of accounts to almost fully integrated. For example, in France are two of accounts - accounting (financial) and management accounting, as interaction between them through special accounts screens; in Germany for the management and accounting, there are separate charts of accounts, the U.S. management accounting is a separate unit within the accounting.

To resolve the above dilemma can offer two basic ways.

First way. Parallel and almost independently of each other record-keeping, ie, the same operation is recorded in the accounting system twice: once - for the purposes of accounting and taxation, the other - for the purposes of management accounting. This path is inefficient from the standpoint of labor costs, but the procedure of duplication increases the reliability of the information. Sometimes it is very important. For example, such a path is logical to recommend management of the parent company in the case where there is "disloyal", the more "hostile" attitude of management subsidiaries to the headquarters of the holding, or in situations where the level of accounting in the subsidiary is low and the headquarters of the holding This report does not trust, ie, in situations of restructuring the company. But in any case it is a temporary measure. After the establishment of strict control over the activities of the subsidiary shift "hostile" or unprofessional management and organization of the automated system of accounting and tax accounting this way ceases to justify himself. Therefore, when sooner or later, a legitimate question, but why keep the two concurrent life that still need to work with the same data, you should optimize the procedure for the preparation of analytical features and thus combine the interests of the two counts. World experience shows: all of us eventually come to this.

Second way. This approach is based on the fact that only part of the operations require different recording, so as the basic accounting data come from the primary accounting data, which are then adjusted. Method of adjustment depends on the reasons causing it. As an example, is said to be at least two important reasons.

Reason 1. Since the economic business cycle does not coincide with the boundaries of the jurisdiction of the company, the management financial statements to reflect the performance of business differs from the accounting of financial statements as a reflection of the performance of the company. Accordingly, the accounting data required adjustments. In this case, produced or adjusting the size of the accounting data, ie the transition from accounting data to management by the correction of records, or complete replacement of the accounting data rates obtained (measured or calculated) in the management accounting system.

Reason 2. Differences in accounting policies (principles, methods, procedures, etc.) in the field of accounting and management accounting lead to differences in accounting data and management of financial reporting. Accordingly, these accounting adjustments required by the introduction of correction of records.