Business Finance Accounting Functions

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    • Financial accounting functions help a firm report operating data.finance image by Christopher Hall from Fotolia.com

      Business finance accounting functions play an important role in an organization's financial accounting and reporting processes. These functions help senior management evaluate corporate activities, gauge business performance and make appropriate decisions in the short and long terms. Even non-profit institutions, such as government entities and philanthropic organizations, need accounting and financial reporting functions to record and present operating data.

    Bookkeeping

    • Bookkeeping is a business practice that helps an organization record operating transactions through debits and credits of financial accounts. These accounts are asset, liability, equity, revenue and expense. A bookkeeper credits a liability, revenue or equity account to increase its amount and debits it to reduce the account balance. The opposite holds true for an asset or expense account. Assets are resources that an organization owns and include land, cash, accounts receivable, equipment and machinery. Liabilities are debts that a company must repay and may be accounts payable, loans and long-term bonds. Revenue is income that a company generates by selling goods or providing services. Expenses are charges incurred through operations. Equity relates to owners' capital in a company.

    Cost Accounting

    • Cost accounting, otherwise known as management accounting, is an operating method that helps senior leadership evaluate cost levels in manufacturing processes. Top executives also gauge the impact of cost fluctuations on corporate profit levels in the short and long terms. To improve profitability and monitor expense levels, department heads implement budgets in which they set limits or thresholds. Segment managers and operating personnel must abide by budget limits when performing tasks.

    Financial Reporting

    • An essential finance accounting function involves the preparation and reporting of financial statements at the end of each month or quarter. Generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS) require that businesses present accurate and complete accounting reports. To comply with GAAP and IFRS, a firm must issue four types of financial statements: balance sheet, statement of profit and loss, statement of cash flows and statement of equity. A balance sheet, also known as a statement of financial condition, indicates corporate assets, liabilities and equity capital and provides insight into a company's economic solidness at a point in time. An income statement lists a firm's revenues, expenses and net profit over a period. A statement of cash flows details a company's cash receipts and disbursements over a period of time. A cash flow report indicates (in this order): cash flows from operating activities, cash flows from investing activities and cash flows from financing activities. A statement of equity helps investors understand owner-related transactions, such as dividend payments and stock issuance.

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