Accounting & Finance Policies & Procedures

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    Bookkeeping

    • In the corporate setting, bookkeeping provides the conceptual foundation on which accountants record operating activities. Bookkeepers, also known as junior accountants or accounting clerks, work under the tutelage of experienced professionals, recording transactions by debiting and crediting financial accounts. These include assets, liabilities, revenues, equity capital and expenses. A junior accountant debits an asset or expense account to increase its amount and credits it to reduce the account's balance. The opposite is true for a revenue, liability or expense account. The accounting concepts of debit and credit are distinct from the banking terminology. As a result, a debit to an asset account, such as cash, means an increase of the account balance--the opposite is true in banking transactions.

    Financial Analysis

    • Financial analysis enables top management to take a look at the performance and potential of all corporate businesses. Poring over financial trends is cardinal in modern economies, as it lifts the veil on essential factors that create value for customers and improve a company's market share and profitability. Tools that companies rely on to evaluate operating data include financial ratios. Also called performance metrics or indexes, financial ratios help a company analyze its profitability and liquidity levels, among other factors. Profitability ratios include net profit margin, which indicates how well a company generates revenues with its resources. The metric equals net income divided by total sales. Liquidity ratios include working capital, which equals current assets minus current liabilities. The ratio indicates a firm's short-term cash availability.

    Reporting

    • Reporting is a financial procedure that helps companies shed light on their economic fluctuations, with an emphasis on long-term profit trends. A company's controller puts into place sound financial reporting practices and procedures to ensure accuracy in corporate data. These procedures also help the firm abide by accounting norms, such as U.S. Securities and Exchange Commission guidelines. A complete set of financial statements includes a balance sheet, a statement of income, a statement of cash flows and a report on equity capital.

    Fiscal Compliance

    • In setting accounting and financial policies, corporate leadership keeps a close eye on regulatory compliance guidelines, especially fiscal compliance at the state and federal levels. Department heads put into place adequate policies to ensure that employees file corporate tax returns in accordance with Internal Revenue Service rules. Segment chiefs constantly review these policies because IRS rules may change from time to time.

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