Accounting Department Definition Function And Structure

Accounting Department Definition

Functions of the Accounting Department

To maintain and record all business transactionsBusiness TransactionsA business transaction is the exchange of goods or services for cash with third parties (such as customers, vendors, etc.). The goods involved have monetary and tangible economic value, which may be recorded and presented in the company’s financial statements.read more accurately and comprehensively in a systematic way, they can be retrieved and reviewed at any time.To maintain adequate internal controlsInternal ControlsInternal control in accounting refers to the process by which a company implements various rules, policies, or procedures to ensure the accuracy of accounting and finance information, safeguard the various assets of the business, promote accountability in the business, and prevent the occurrence of frauds in the company.read more within the organization to safeguard its valuable resources.To provide a basis for performance assessment and create accountability across the organization.To keep track of costs incurred by the company and advise the modification of existing operations to reduce operating costsOperating CostsOperating expense (OPEX) is the cost incurred in the normal course of business and does not include expenses directly related to product manufacturing or service delivery. Therefore, they are readily available in the income statement and help to determine the net profit.read more.To support senior management in the decision-making process by appropriately presenting the financial data.To plan based on anticipation of business needs and expected availability of resources.

Roles & Responsibilities

One of the primary responsibilities is to properly collect all the financial data and prepare the financial statementsFinancial StatementsFinancial statements are written reports prepared by a company’s management to present the company’s financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels.read more/ reports. These reports are used to prepare budgets, forecasts, and other decision-making reports. These reports are also used to communicate with lenders, investors, and other stakeholders.Maintaining a healthy relationship with the vendors by ensuring that they get paid on time. However, they should look for opportunities to save money by offering discounts/ incentives due to timely or advance paymentsAdvance PaymentsAdvance payment is made by a buyer to the seller before the actual scheduled time of receiving the goods and services. It protects the seller from the risk of non-payment. Additionally, it helps sellers financially in the production of the goods or rendering of services.read more. At the same time, the accounting department should also ensure that the minimum amount of money goes out per payment, but without any late payment charges.Track account receivablesAccount ReceivablesAccounts receivables is the money owed to a business by clients for which the business has given services or delivered a product but has not yet collected payment. They are categorized as current assets on the balance sheet as the payments expected within a year.
read more and outstanding invoices and advise if any collection actions are required. The accounting department should ensure that the customers pay the invoices on time and maintain a cordial/ friendly relationship.It is solely responsible for the payroll functionPayroll FunctionPayroll refers to the overall compensation payable by any organization to its employees on a certain date for a specific period of services they have provided in the entity. This total net pay comprises salary, wages, bonus, commission, deduction, perquisites, and other benefits.read more. They have to ensure that all the employees get paid timely and accurately. Additionally, the department should also ensure that employee taxes are assessed accurately, and the payments are made timely to the state and federal authorities.They need to maintain financial controlsFinancial ControlsFinancial controls refer to the development of policies and procedures by an organization to manage its financial resources and operate efficiently.read more via reconciliationsReconciliationsReconciliation is the process of comparing account balances to identify any financial inconsistencies, discrepancies, omissions, or even fraud. At the end of any accounting period, reconciliation involves matching balances and ensuring that debits (credits) from one account for one transaction is same as the credit (debits) to another account for the same transaction.read more and adherence to the applicable standards of accounting, such as US GAAP. All of these practices are implemented to prevent any fraud and theft. As a finance controller, the department should ensure proper maintenance of the procedures without any slack.

Accounting Department Structure

Most companies have more than one staff member in their accounting department, and hence they have to set an organizational structure to streamline their management. In general, it comprises Chief Financial Officer (CFOCFOThe full form of CFO is Chief Financial Executive, and he or she is a top level executive of the firm who is responsible for the firm’s overall finance functions and has the authority to make financial decisions for the organization. read more), Financial ControllerFinancial ControllerThe financial controller is one of the senior-level executives of the company who is responsible for managing all the finance and the accounting, preparation and publishing of the financial statements such as the balance sheets, cash flow statement and the income statements timely, auditing compliance, and coordinate in the preparation of the economic forecast of the company.read more, Managers, and Accountants. The structure is as follows:

The CFO is at the top of the department and reports directly to the owner of the business or the Chief Operating Officer (CEO).The Financial Controller reports to the CFO and has more specific responsibilities within the department.The Finance Controller generally has a team of Managers – Payroll Manager, Accounts Receivable Manager, and Accounts Payable Manager.Each division manager usually has a team of Accountants.

Value of Accounting Department

The accounting department plays a vital role in running a business. It helps track revenue (money in) and expenses (money out) while ensuring compliance with all statutory requirements. It also provides quantitative financial information to management, lenders, investors, and other stakeholders, who use it to make informed business decisions.

Key Positions of the Accounting Department

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The following are some of the key positions:

Chief Financial Officer (CFO): The CFOs are usually at the top of the finance department of large corporations. They are responsible for overseeing the business’s financial health and managing the overall finance department, which includes financial planningFinancial PlanningFinancial planning is a structured approach to understanding your current and future financial goals and then taking the necessary measures to accomplish them. Because this does not begin and end in a specific time frame, it is referred to as an ongoing process.read more & reporting, short & long-term business strategy, auditing, internal risk management, etc. They also help senior management understand the financial implications of various ongoing activities – within and outside the organization.Financial Controller: The Financial Controllers work alongside the CXOs, and they are responsible for financial accountingFinancial AccountingFinancial accounting refers to bookkeeping, i.e., identifying, classifying, summarizing and recording all the financial transactions in the Income Statement, Balance Sheet and Cash Flow Statement. It even includes the analysis of these financial statements.read more and the preparation of reports on project management, budget, and more. However, their major focus is on managing immediate financial issues.Treasury Manager: The Treasury Managers help in the formulation and development of various treasury policies, which include identification of best investment opportunities, optimized usage of credit facilitiesCredit FacilitiesCredit Facility is a pre-approved bank loan facility to businesses allowing them to borrow the capital amount as & when needed for their long-term/short-term requirements without having to re-apply for a loan each time. read more, reduction of financing costsFinancing CostsFinancing costs refer to interest payments and other expenses incurred by the company for the operations and working management. An enterprise often borrows money from different financing sources to run their operations in return for interest payments and capital gains.read more, etc.Accounting Manager/ Chief Accountant/ Accounting Supervisor: These managers are responsible for maintaining and reporting all the financial transactions. They also establish and enforce the accounting principles based on the auditing policy and statutory requirements.Accountants: AccountantsAccountantsAn accountant is a finance professional responsible for recording business transactions on behalf of a firm, reporting the firm’s performance and issuing financial statements. Thus, an accountant plays an important role whether it is a small domestic entity or a large multinational company.read more play a vital role in an accounting department as they are involved in measuring and interpreting all the financial information.
Chief Financial Officer (CFO): The CFOs are usually at the top of the finance department of large corporates. They are responsible for overseeing the financial health of the business and managing the overall finance department, which includes financial planningFinancial PlanningFinancial planning is a structured approach to understanding your current and future financial goals and then taking the necessary measures to accomplish them. Because this does not begin and end in a specific time frame, it is referred to as an ongoing process.read more & reporting, short & long-term business strategy, auditing, internal risk management, etc. They also help senior management understand the financial implications of various ongoing activities – within and outside the organization.Financial Controller: The Financial Controllers work alongside the CXOs, and they are responsible for financial accountingFinancial AccountingFinancial accounting refers to bookkeeping, i.e., identifying, classifying, summarizing and recording all the financial transactions in the Income Statement, Balance Sheet and Cash Flow Statement. It even includes the analysis of these financial statements.read more as well as the preparation of reports on project management, budget, and more. However, their major focus is on managing immediate financial issues.Treasury Manager: The Treasury Managers help in the formulation and development of various treasury policies, which include identification of best investment opportunities, optimized usage of credit facilitiesCredit FacilitiesCredit Facility is a pre-approved bank loan facility to businesses allowing them to borrow the capital amount as & when needed for their long-term/short-term requirements without having to re-apply for a loan each time. read more, reduction of financing costsFinancing CostsFinancing costs refer to interest payments and other expenses incurred by the company for the operations and working management. An enterprise often borrows money from different financing sources to run their operations in return for interest payments and capital gains.read more, etc.Accounting Manager/ Chief Accountant/ Accounting Supervisor: These managers are responsible for maintaining and reporting all the financial transactions. They also establish and enforce the accounting principles based on the auditing policy and statutory requirements.Accountant: The AccountantsAccountantsAn accountant is a finance professional responsible for recording business transactions on behalf of a firm, reporting the firm’s performance and issuing financial statements. Thus, an accountant plays an important role whether it is a small domestic entity or a large multinational company.read more play a vital role in an accounting department as they are involved in the measurement and interpretation of all the financial information.