Courses for Kids
Free study material
Offline Centres
Store Icon

Functions of an Accountant

Last updated date: 22nd Mar 2024
Total views: 352.5k
Views today: 5.52k
hightlight icon
highlight icon
highlight icon
share icon
copy icon

Who is an Accountant?

An accountant is a person who records the business and financial transactions on behalf of the organization, he also reports the performance of the company to the management, and issues the financial statement of the concern. Several examples of the types of transactions in which an accountant is involved are as follows:

  • An accountant issues an invoice to a customer which involves the recording of sale and account receivable. 

  • An Accountant also receives an invoice from a supplier, who is involved in the recording of an expense or asset or an account payable.  

  • An accountant issues a salary or wage paid to an employee involving the recording of an expense and outflow of cash.  

  • An accountant also reconciles the bank statement.  

The Records Produced by an Accountant

In addition to the work of transactions performed by the accountant, the recording is also produced by an accountant. Following are the types of recording that is being provided:

  • The Financial statements are presented to the owners or the business operators of a business, as well as to the lenders and the creditors.

  • Management reports are also issued to the management team. The reports are highly customized according to the needs of the entity, which may cover important business topics.

  • The tax reports are also issued to several government entities. The reports are then provided in detail regarding the amounts that are paid for income taxes, property taxes, and other sales taxes. 

Process Creation by the Accountants  

An accountant is again involved in the creation of a number of processes within the business network, which typically include several controls to ensure that the assets are properly managed by them. Examples of such processes are:

  • Shipments to the customers

  • Receipts from the suppliers

  • Cash receipts from the customers

Maintaining Books of Accounts 

The Books of accounts have to be maintained if the gross receipts are more than Rs. 1,50,000 in 3 preceding years says the tax law. This too applies to a newly set up profession whose gross receipts are expected to be more than Rs. 1,50,000.

All the below professions are required to maintain the books of accounts:

  • Legal Firms

  • Medical Institutes

  • Engineering Fields

  • Architectural Sectors

  • Accountancy Department

  • Technical Consultancy Services

  • Interior decoration professions

  • The authorized representative, who represents another person for a fee before a tribunal or for any authority constituted under any law

  • Film artist 

  • Company secretary

Primary Function of Accountant

Accountants in the growing business arena perform a wide variety of functions. The primary functions performed by them can be summed up in the following:

1. Maintaining the Books of Accounts

This is the primary function of an accountant, which is to perform the functions of accounting. The accountant is required to maintain a systematic record of all the financial transactions of the firm. 

2. Statutory Audit

The laws as operated by the company law require a few organizations to be compulsorily audited by an auditor. So, the limited companies, the co-operative societies, companies, or the firms who have exceeded a certain turnover limit need their accounts to be audited.

3. Internal Audit

Few organizations opt for internal auditing, which can be done by the accountants. 

4. Taxation

An accountant is also capable of handling the taxation matters for a firm or even for an individual.

5. Cost and Management Accountant

Cost and Management accountant does more than an ordinary accountant, he plays an overall advisory role in the cost department and the management of an organization. 

6. Financial Advice

Accountants who have widespread knowledge and experience in many fields of the industries can also provide insight with good financial advice which in turn will be beneficial for the company.

FAQs on Functions of an Accountant

1. What are Financial Transactions?

Ans. A financial transaction is an agreement, or communication, that is carried out between a buyer and a seller in exchange for an asset for payment. The financial transaction involves a change in the status of the finances of two or more businesses or between individuals. It is still also a transaction if the goods are exchanged at a different time, and the money at another time. Financial transactions include cash receipts, deposit corrections, requisitions, and purchase orders, invoices, travel expense reports.

2. What Comprises a Financial Statement?

Ans. Financial statements are the written records of a business's financial situation, which include the standard reports like the balance sheet, income or profit, and loss statements, and also the cash flow statement. In a practical sense, the financial statements are a summation of the financial position of an entity at a particular time period.

The balance sheet, income statement, and cash flow statement each of these offers a unique detail with information that is all interconnected. Together these three statements give a comprehensive portrait of the company's operating activities and its performance.

3. What is Meant by ‘Reconciling of the Bank Statement’?

Ans. Reconciliation means checking whether the two sets of records are in accordance with each other or agree with each other or not. A bank reconciliation statement is a summary of banking and of a business activity that reconciles an entity's bank account with its own financial records. The statement drafts the deposits, withdrawals, and other activities that affect a bank account for a specified period of time.