One word that is a nightmare for all: tax time.
Every year, a financial accountant steps in and considers the company's earnings and assets, gains and losses, and, of course, taxes. Since a business need not only be interested in the economical activities within a company just once a year, financial accountants may step in to consistently produce reports pertaining to the company's financial health that is then distributed to shareholders, investors, and others external to the business.
So are financial accountants deterred by tax time? Well, not quite. Individual taxes happen once every year, but a financial accountant draws up financial reports either weekly, every three months, or at least four times per year. Now does that not sound like a stressful job? A financial accountant is needed within an organisation all year-round and he or she is observing, investigating, and reporting on a daily basis.
Have you heard that accountants are responsible for number crunching? Well, that is exactly what a financial accountant does. Every day the financial accountant will stare at facts and figures so that the most accurate financial statements can be drawn up.
Whether you see financial accountants as the investigators within a company or as walking calculators, you must remember that it is these people who magically generate reports.
We are keen on taking you into an organisation so that you can learn all about the role of financial accountants in the accounting process.
If you are considering taking up accounting courses at a university level, this is the article for you. If you are already in university pursuing accounting, Superprof breaks down the entire journey of a financial accountant for you.
If you are an accounting student struggling to make heads or tails of the content that you consume in your lectures, why not reach out to an accounting tutor?
What is Financial Accounting?
Before we get into the nitty-gritty details of financial accounting, let's look at what you need to do so that you can find yourself number-crunching at a reputable organisation.
To be a financial accountant you need to:
- Have taken subjects like mathematics, accounting, economics, business sciences, or CAT at school level
- Register at an accredited university that offers a bachelor of commerce degree, accounting, or a bachelor of science degree
- Also, pursuing global qualifications offered by the Association of Chartered Certified Accountants (ACCA) or Chartered Institute of Management Accountants (CIMA) is necessary in most cases
The Generally Accepted Accounting Principles (GAAP), is the collection of accounting standards that govern how a company must prepare its accounts for reporting. Once you have become a financial accountant, you must remember to follow the standards established in GAAP.
Have you ever wondered why is it that a financial accountant spends so much time deciding how to record and report business events?
Well, the financial accountant's purpose is to make communication of business events and finances accessible to external shareholders.
The information that the financial accountant produces falls into the hands of shareholders and others who are interested in knowing how a business performs. Financial information also tends to fall into the hands of people who make decisions in the business. So this information needs to be accurate based upon the accepted accounting principles and somewhat standardised so that it is easy for external parties to understand the information.
If you are meticulous and the type of person who likes to have every detail down to the T, then this is surely a career path for you.
The thing about being a financial accountant is that you must adhere to GAAP principles. You must constantly stay abreast of any changes in reporting standards as well as the entire body of rules governing financial reporting.
Do you think that management accountants also follow GAAP principles?
Financial Statement Preparation
When Superprof chatted to a financial accountant, he stated that the reason he enjoys being a financial accountant is because he enjoys working with numbers. Seems like quite the stereotype to say all financial accountants are people who enjoy working with numbers but we can't see you preparing financial statement after financial statement if you are not fascinated by numerals.
Truth be told being passionate about numbers is not the only thing you need to possess in order to gain the title of a financial accountant. To be a financial accountant, we believe that you also need to have a good sense of humour. Being in charge of preparing financial records can be stressful, and thus we believe a sense of tongue-in-cheek humour is essential for you to get through the burdens of the day. You should also be the type of person who can get along with others. Since you are tasked with sharing financial documents with so many people, this trait is important. Another trait that you should possess as a financial accountant is that you must motivate others.
You need to keep accounting principles in mind when drawing up your financial records.
One method that financial accountants utilise to stay abreast of your financial statements is to record transactions as they occur. Many companies tend to follow this approach where they treat every transaction as if it has occurred already to avoid long-term setbacks. For many companies, the state of their business would be affected if they stayed away from reporting long-term payments. This would mean that these companies would seem to have no income coming through but far too many expenses.
Can you remember the accounting cycle from your high school accounting class?
We refer to the process as the accounting cycle, where every transaction is entered in general ledgers and can be used in the trial balance.
Would you agree that recording every transaction is the best method to get the most accurate picture of a company's financing?
While the first method of recording transactions as they occur seems desirable, the second method available to financial accountants is to record transactions only once cash comes in.
The promised date of the money transfer is when a transaction actually gets recorded in your books.
The thing about this method of recording is that there appears to be a gap in the information provided. Certain things that have been transacted and not paid for can not be recorded and hence it provides an unclear picture of the company.
Most companies especially small-medium enterprises (SME's) adopt this method of accounting practice solely as they feel it to be more simple.
As stipulated in GAAP, the former method of financial recording is required from large companies.
Financial Accounting Careers: Is it a Good Choice or Not?
We have spoken about the role of the financial accountant as being the person who records every financial transaction, using the generally accepted accounting principles.
A financial accountant is also someone who adheres to regulations that have been stipulated.
Everything from financial advice to financial budgets needs to be prepared by the financial accountant. A financial accountant is given the task of calculating taxes as well. Having said that, financial accounting is a great career to get into.
Starting as a financial accountant, you could even work your way up to director status.
The role of a financial accountant is vital in any company simply because they make a big difference in a company. The financial accountant is indispensable because there is a need for someone to deal with all financial issues within a business.
Financial accountants earn about R28 448 per month which adds up to a yearly payment of R341 000 yearly. Do we need to say more?
Financial Accountants Have The Following Knowledge and Skills:
Do not underestimate the value of knowing the basic accounting principles well at a high school level, you require these and much more when you actually become a financial accountant.
Research skills are further valuable for financial accountants. This is because as a financial accountant, you constantly need to stay abreast of regulations.
These financial accountants must have negotiation skills as they are constantly making recommendations to ensure the company performs better.
While it cannot be seen as a skill, a financial accountant must have a personality where he or she can enjoy being busy all day. Financial accountants tend to work meeting the company's requirements by dealing with payments and receipts. This means the financial accountant needs to have the ability to deal with the stress of playing a vital role in their organization.
Aside from the general skills demanded from these key roleplayers, these accountants must remain on the ball constantly acknowledging all that is required of them.
Now that you have learnt about the role that the financial accountant plays in an organization, you can find out what role a managerial accountant plays as well.
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