Top Reasons Why your small business needs an Accountant

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My aunt has a small business in UAE. At first she handles everything but after couple of months, she told dad that she felt she’s on the busy streets of Manila. What I’m saying is that she can’t handle things the usual way. With that my dad advises her to hire an accountant. I heard their very long conversation and the long talk goes on and on and my aunt end up hiring a part time accountant in Dubai to do the job for her.

Dad told me four reasons why aunt should hire an accountant. Here are they.

1. It is vital to the success of the business

Having an accountant will help you to see the cash flow of the business. You can accurately see if you are earning or start losing money. The backbone of the business is simply money. If you start losing up then you are done! Accountants are born for these specific tasks. So better entrust thins thing to them. They are the professionals.

2. Data analysis for growth and profitability opportunities

If your data is just hiding in the folders on top of your desk and you are not interpreting, analyzing or using it to help drive your business direction and decisions, you are totally missing out on a great opportunity! Your accountant will help you dive into the numbers and use them as your map for growth and success, for profitability in the future.

3. Tax

As we all know, we need to pay our taxes, and not just simply paying it, but paying it accurately. Tax computation is a long and difficult process. It is like entering a dark cave not knowing which way will lead to the exit. A wrong computation may lead to huge penalties or fines and worse case it will make the jail your second home.

To make sure that you are to pay the right taxes, hire accountants. They are well trained for this matter. They studied the course for years. So you are in good hands!

4. You need business plans

There are hundreds of reasons why business fails and one of them is lack of planning. When you asked a business owner why they failed their simple answer is they didn’t know where to start. On this scenario comes an accountant into action. A very good accountant will partner with a business to look at all the data and help build a road map to success. Poor planning isn’t necessary, and bringing a professional on board can help a small business plan for success.

As I understand these four things, I said to myself that when I start my own business someday, an accountant is my first employee.

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Want to be an Accountant in Dubai? You must know… The Basics of Accounting Principles - Part 3

In the last two post, we tackled the first seven basic accounting principles; economic entity assumption, monetary unit assumption, time period assumption, cost principle, full disclosure, going concern and matching principle. For this post we will talk about the last three basic principles. Let’s get started.

Revenue Recognition Principle

The revenue recognition principle is a cornerstone of accrual accounting together with matching principle. They determine the accounting period in which revenues and expenses are recognized.

Under the accrual basis, revenues are recognized as soon as a product has been sold or a service has been performed. With this, a company could earn $10,000of revenue in its first month of operation but receive $0 in actual cash that same period.

It states that you should only record revenue when an entity has substantially completed a revenue generation process.

Materiality

In accounting, materiality allows you to violate another accounting principle if the amount is so small that the reader of the financial statements will not be misled. Professional judgment is needed to decide whether an amount is insignificant or immaterial.

A good example o this concept or principle is the immediate expensing of a $12 wastebasket that has a useful life of 10 years. The matching principle directs you to record the wastebasket as an asset and hen depreciate its cost over its useful life of 10 years.

The materiality principle simply allows you to expense the entire $12 in the year it is acquired instead of recording depreciation expense of $1 per year for 10 years. Reason for this is that no creditor, investor or other interested party would be misled by not depreciating the waste basket over 10-year period.

Determining what is a material or significant amount can require professional judgment

Conservatism

It is the general concept of recognizing expenses and liabilities as soon as possible when there is uncertainty about the outcome. If a situation arises where there are two acceptable alternatives for reporting an item, conservatism directs the account to choose the alternative that will result in less net income and less asset amount. This principle helps the accountant to break a tie. It does not direct the accountants to be conservative. They are expected to be unbiased and objective.

This also led the accountants to anticipate or disclose losses but not similar action for gains. Potential losses from lawsuits will be reported on financial statements but potential gains will not be noted. Accountants may also write inventory down to an amount that is lower than the original cost, but will not write inventory up to an amount higher than the original cost.

That’s it! These are the 10 basic accounting principles that will help you land a job in the field of accounting. I hope that this series of post help you in your chosen career! Thanks!

Accountants in UAE? Click here http://embassy-fs.com/

• Read Part 1 here
• Read Part 2 here

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• Accounting Firms in Dubai: Top 4 skills you need to be a successful accountant
• Dubai Accountant – Duties and Responsibilities
• Dubai Accounting Firms: Different types of Accountants
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Want to be an Accountant in Dubai? You must know… The Basics of Accounting Principles - Part 2

Part Time Accountants in Dubai

In the previous blog we tackle the first part of the basics of Accounting, economic entity assumption, monetary unit assumption, time period assumption and cost principle. Today we will talk about the next three principles – full disclosure, going concern and matching principle.

Full Disclosure Principle

This principle states that you should, as an accountant, must include all information in an entity’s financial statements that would affect the reader’s understanding on those statements. Important information should be disclosed within the statement or in the notes section of the statement.

In business terms, this principle requires the company to provide the necessary information so that people who are accustomed to reading financial information can make informed decisions done by the company.

Companies usually list its significant accounting principles as the first note of their financial statements.

The required disclosure can be found in the following.

• Financial statements
• Management discussions and analysis
• Quarterly earning reports, press releases and other means of communications

[See Filipino Accountants in Dubai]

Going Concern Principle

This principle is the assumption that an entity will remain in business in the future. It will continue to exist long enough to carry out its objectives and commitments. This simply means that the entity will not be forced to stop operations and liquidate its assets in the near term at what may be very low sale prices.

It is a required responsibility of the accountant to disclose a statement if he believes that the company’s financial situation will not be able to make the company to continue on. By making this assumption, the accountant is justified in deferring the recognition of certain expense until a later period, when the entity will presumably still be in business and using its assets in the most effective manner possible.

[See Dubai Accountant – Duties and Responsibilities]

Matching Principle

This states that all expenses must be matched in the same accounting period. This requires companies to use accrual basis of accounting. The matching principle requires that expenses be matched with revenues.

Ideally, the matching is based on a cause and effect relationship. If no cause and effect relationship exists, accountants will show an expense in the accounting period when a cost is used up or being expired. If a cost cannot be linked to revenues, the expenses must be recorded immediately.

Just for an example:

Sales commission expense should be reported in the period when the sales were made. Wages to employees are reported as an expense in the week when the employees worked and not in the week when the employees are paid.

If the company agrees to give its employees 1% of its 2010 revenues as a bonus on January of 2011, the company should report the bonus as an expense in 2011 and the amount unpaid at the December 31, 2011 as a liability.

The future economic benefits of things such as advertisements cannot be measured; the accountant must charge the ad amount to expense in the period when the ad was run.


See Part 3 here.
Read Part 1 here.

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You may read also:

• Accountants in Dubai: 6 Types of Accounting Degrees
• Top 4 skills you need to be a successful accountant
• Basic Theories About Accounting

Want to be an Accountant in Dubai? You must know…The Basics of Accounting Principles - Part 1

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Field of accounting has general rules and concepts. If you want to be employed in an Accounting Firm or just want to be a part time accountant in Dubai like in Embassy FS, you must learn and know what the principles of Accounting are.

Basically these are general rules which are referred to as the “basic accounting principles and guidelines” that are more detailed, complicated and legalistic accounting rules.

I have divided the principles on three parts so that we may tackle each one carefully. The following is a list of the first 4 main accounting principles and guidelines.

1. Economic Entity Assumption

This is the one of the assumptions made in generally accepted accounting principles. It states that the record activities of a business entity will be kept separate from the record activities of its owner and any other business entities. This simply means that you must maintain separate accounting records for each entity, and not intermix with them the assets and liabilities of its owners. Also you must associate every business transactions with an entity.

Any organization can be an economic entity. Examples may include but not limited to companies, municipalities, institutions and hospitals.

2. Monetary Unit Assumption

The monetary unit assumption states that the dollar (or the currency you’re using) is stable in the long run. It does not lose its purchasing power and does not change over time.

This assumption allows the accountant to add the cost of a parcel of land purchased in 2012 to the cost of the land in 1952. For example, if a three-acre parcel cost the company $30,000 in 1950 and in 2012 a three-acre parcel adjacent to the original parcel is purchased for a cost of $900,000, the accountant will add the $900,000 to the land account and will report the land’s account balance of $930,000 on the company’s balance sheet. As a result, the accountants ignore the effect of inflation on record amounts.

To make things simple, monetary unit assumption means that the business should have one money unit to record its transactions, in our example, it is US dollars.

3. Time Period Assumption

This principle is the concept that a business should report the financial results over a standard time period, usually monthly, quarterly and annually. The shorter the time period, accountants likely need more effort to estimate amounts relevant to the given period.

It is imperative that the time period or time interval be show in the heading of each income statement, cash flow and stockholders’ equity. For example, an income statement may cover the “Eight months ended August 31”. However, the balance sheet can be dated as of specific date rather than a range of dates, for example, we can write “as of August 31” in the header.

4. Cost Principle

It is one of the basic underlying guidelines in accounting, also known as the historical cost principle. It requires that assets will be recorded at the cash amount at the time that the asset is acquired.

Because of this accounting principle asset amounts are not adjusted upward for inflation. As a general rule, asset amounts are not adjusted to reflect any type of increase in value. An asset amount does not reflect the amount of money a company would receive if it were to sell the asset at current market value.

The cost principle also means that valuable brand names and logos will not be reported as assets on the balance sheet. This could result in company’s most valuable assets not being included in the company’s asset amounts.

Basically it is the accounting guideline that requires amounts in the accounts and on financial statements to be the actual cost rather than the current value.


Click here for the 2nd Part

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More on Accounting:
Dubai Accountant – Duties and Responsibilities
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Basic Theories About Accounting
Beginning In Accounts And Accounting Books

Dubai Accounting Firms: Different types of Accountants

Accountants in UAE

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It was a perfect day! I rose early, preparing for one of the biggest day in my life – my first job interview. I left the house past 6 am even though my interview will fall at 9 and I got at the Embassy FS office at early 8 am.

I didn’t feel any nervousness or any nerve racking emotions. What I felt is excitement and gladness. The clock ticks at 9 and here comes the tie-suited good looking man, holding a piece of paper, calling out my name.

The interview starts and the first-half is good. The tension starts to build up when he asked me this question, “If ever you will be hired, what type of accountant you want to be?”! Boom! I felt that the world stop spinning for a second. I really don’t know what to say, to the point that I nodded and said, any accounting position that is in need or vacant.

That point, the tie-suited man noticed that I don’t have any idea about types of accountant. He rise up and went to the white board, my heart is beating fast as he smiled and discussed the different types of accountants.

Different types include:

Auditors

Auditors help to ensure firms efficiency by keeping public records accurate and confirm payment of taxes properly on time. Auditors also analyze the financial information for various entities such as companies, clients and local governments. They provide information to clients by preparing, analyzing and verifying financial documents.

Forensic Accountant

This is a special are of practice in accountancy where-in accounting, auditing and investigative skills are used to assist the court in legal matters. Also known as forensic auditors or investigative auditors who investigate white-collar crimes like security fraud and bankruptcies.

Public Accountant

He is a general accountant who either works for an accounting firm or has his own private practice. His daily tasks include auditing, tax and financial planning, consulting and providing advice about compensation and benefits.

Tax Professional

He is specifically trained in taxation. He knows exactly how to compute for your taxes.

Financial Adviser

He is the one who provides investment advice and financial planning services to clients. He consults them with an intention to better their financial situations.

Accounting Consultants

He has high subject matter expertise in preparing financial reports, pro-forma financial statements and repots. He also analyzes, interprets and evaluates financial statements and reports for clients and organizations. He can help a business with all of its financial needs.

I was greatly overwhelmed when I heard all of these. For the second time, he asked me what type of an accountant I want to be? This time, I answer him confidently that I want to be a Tax Professional. He smiled and offered me a hand, saying welcome to the company.

Like this blog? You may also read:

Dubai Accountant – Duties and Responsibilities and Basic Theories About Accounting

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Remembering my Crush who is an Accountant in Dubai, UAE

It is a boring afternoon that I turned on my computer and browse for some interesting stuff in the internet. After a few minutes I saw this interesting news about IMA Regional conference. The article becomes interesting because I remember my college crush who is currently working in Dubai as an accountant for Embassy FS. I think that sharing this link to her is more than friends relationship booster!

I shoot her an email with this content.

Hi Lollipop! I saw in the news that Institute of Management Accounts has announced the program and the speaker lineup for its upcoming Middle East Conference, taking place on May 14-15, 2015 at The Address Dubai Marina. I just want to share this to you, believing that it can serve as a career booster.

The theme of the conference is “The Next Generation Finance Leaders”. It aims to bring the fore a new vision for the future role of finance professionals, from CFOs to Accountants. The conference will also tackle the shifting landscape of today’s corporate finance world and the key drivers behind it, such as pervasiveness of new technologies, increasing demand for insight-driven real-time data, and a widening of responsibilities for the next-generation finance leaders.

Attending the conference will definitely help you in achieving your goals as an accountant. This can take you higher in your career. You can share the news also to your co-peers. It will be great if you can attend the event.

I am hoping and praying success for you!

My afternoon became so great after I read that “SENT” on my computer screen. I hope to hear from her soon. Remembering Lollipop pushed me in writing this blog.

Do you remember someone while reading this? Sent them a message too!

Thanks for reading!


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My Business and its buddy - Accounting

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As I am working few years ago, I attended a seminar about proper handling of finances. What really captured me is the speaker statement that “We must not be contented being an employee all through-out; we should strive to be an employer someday”! From that day on, I can’t get that phrase out of my mind, until I decided to start up a small business.

At first I understand that the money I invested doesn't return right away, I need to wait for months before I felt the flowing of money back into the pocket. This is when the fifth month of the business I realize that I’m not gaining anything, even a penny. So I do a research about managing a business and I saw this one thing – Accounting!  I didn't know before that I need this A’ thing until I realize that too much money is flowing out and nothing is returning.

As I research, I knew that accounting causes for most small business owners like me. It is one of those office-document tasks that never cross my mind when I decided to start and run the business. Accounting can simply explained as financial reporting. Without it we may end up throwing all of our investments.

I knew that many of small entrepreneurs also struggle with this and I really want to help.  Below is what I did.

First I set up an accounting system and make sure that every transaction is documented or filed on it.

This may be a computer software program or simply a pad of paper (for me at first it was an excel file). What’s important here is that you list all financial transactions like sales, invoices, debits and other dollar transactions. Through this, you can monitor the cash flow of your business. Are you really generating income or just throwing money away.

Second I keep records

Keeping all paperwork relating to debits such as invoices from suppliers, utility bills and sales invoices to customers will help you assessing the growth of the business. This will serve as your primary evidence if you are losing up or earning much. Keeping them in hand will get you in the right decision-making and planning for the future.

Third I go for Pros

There’s no such person who can really help you big in your business rather than the professionals! There are a lot of agencies that offer free accounting consultation and I suggest that we must utilize them efficiently. Just try, there is nothing to lose, and there is more to learn. These are professionals, experienced –rich individuals that mastered and dedicated their lives in this field, so why hesitate to ask for help? I remember this old phrase – No man is an island!

As I apply all of this, my business starts to blossom, I can monitor things clearly and with the help of professionals my business is growing faster! Thanks to Accounting.

I hope this will serve as an inspiration for you as a business owner.  Just try, as I did. Before I end up this article I’ll leave you a message from my Aunt who starts a business in Dubai and applied also these tips.

“Hi there Emman! I followed your advice and looked for an accounting firm in Dubai. My business is now growing! Thanks very much. I’ll share also your thoughts to my friends. Take care always!  

There you go folks! Feel free to write up your thoughts!

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