The theoretical framework of accounting means the set of frameworks, methods, and assumptions that are used to study and apply accounts in financial situations. This also refers to the study of the official changes that affect financial framework and financial reporting by authorities.
An accounting framework is a set of norms that are used to measure, recognize, and present the information that appears in an entity's financial statements. A conceptual framework is defined as a set of ideas and objectives that leads to the creation of a persistent set of rules and standards.
The theory of accounts comprises both the study of historical accounting methods and also the accounting practices that are used in the current financial applications. It also examines the official changes that are made to the financial framework and financial reporting by authorities.
A person, who carries out such an accounting process individually or in any organization, is referred to as an accountant. An accountant is a professional who carries out accounting activities such as audits and financial statement analysis. This process can also be called account analysis. Accountants get employed with any accounting company with an internal accounting department. Sometimes they start their practice individually.
An accountant carries out all financial activities that are related to the accuracy, collection, analysis, recording, and presentation of financial operations. Generally, the accountant also handles all the third parties, like vendors, customers, and financial institutions. He/she should also be responsible for holding other administrative functions in an organization.
The other roles of an accountant include statutory auditing, internal audit, and taxation. Some of the functions of an accountant are maintaining a book of accounts, statutory audit, internal audit, budgeting, taxation, investigation, managing advisory services, and other roles to act as liquidator, cost accountant, arbitrator, etc.
Now, if we talk about the major role of an accountant in an organization, he plays a significant part in its growth and long-term profitability just like other key stakeholders.
The main responsibility of an accountant is preparing asset, liability, and capital account entries by collecting and analyzing account information.
The basic role of an accountant includes establishing accountability of all the assets under an individual’s control. The image below gives an idea about the role of an accountant.
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Accountant Roles and Responsibilities
To prepare accounts and tax returns
To maintain payrolls and control the income and expenditure
To auditing financial information
To collect and present reports, budgets, business plans, and financial statements
To analyze accounts and business plans
To providing tax planning services about current legislation
To finance forecasting and risk analysis
To deal with insolvency cases
To negotiate the terms of business deals and moves with clients and associated organizations
To meet and interview clients
To manage colleagues, workloads, and deadlines.
It is the responsibility of a chartered accountant to give advice, audit the accounts, and provide accurate information about all the financial records. This might also include financial reporting, forensic accounting, auditing taxation, corporate finance, business recovery, and insolvency, or accounting systems and processes.
It is the chartered accountant’s responsibility to implement the accounting systems, prepare monthly financial reports, control the master data of the general ledger, and ensure compliance with the state revenue service.
1. Describe the role of an accountant in an Organization.
Ans. A good accountant should organize his work to maximize productivity and allocate time for undisturbed research and analysis. An accountant should be able to document all the financial transactions by entering account information. He should also justify financial actions by analyzing accounting options. He has to keep track of regular business activities like the balance amount in the company’s bank account, the amount that is due from creditors and also the amount that the company owes to the suppliers. He should be able to give detailed information about any transaction. He should be good enough to evaluate the performance and work efficiency of all departments in the organization.
The role of an accountant in an organization is to write up accounts and prepare financial statements and audit the accounts. He should act as a management accountant and sometimes cost accountant. He supports the government, income tax, and revenue department. He also plays a major role in merger liquidation. All his functions and activities make an accountant a key person in a business or an organization.
2. What are the basic principles of Accounting?
Ans. Accounting principles are basically the rules and guidelines that any company or organization should follow while reporting financial data. Though numerous counting principles were developed, the five basic principles of accounting that are listed below are very common.
The Revenue Principle: This refers to the revenue that is earned in business and gets recorded at the time of sale.
The Expense Principle: This refers to the expense that occurs at the time of accepting goods or services from other bodies.
The Matching Principle: This refers to the function that matches every revenue item.
The Cost Principle: This refers to the record that uses the historical cost of an item in the books, instead of the resell cost.
The Objectivity Principle: This refers to the record that is created with only factual, verifiable data in the books, and never a subjective measurement of values.