Unprecedented developments in computer hardware and software capabilities, and international communications have meant the `traditional' functions of finance staff – transaction processing and `number crunching' – can be performed almost instantly. The primary implication of this for finance staff is that their expertise will be called upon to add value and to contribute to strategy and business management decisions to a far greater extent than ever before.

Benefits

The term `contracting out' (or `outsourcing') refers to the process of procuring goods or services from a third party, (rather than generating such an offering internally), in accordance with terms which are legally enforceable, or contractual.

Cost reduction

In a fiercely competitive business environment, businesses strive to deliver greater value at reduced cost. Direct costs of labour and raw materials may be an obvious initial focus of cost reduction. Direct costs are relatively transparent and therefore quite easy to manage. Where direct costs have.

In theory, any of the operations that a business performs which are not either in direct or strategic support of its specific business activity, or which do not constitute an inextricable part of that business, could justifiably be outsourced. Such operations are often termed `non-core' activities.

General activities performed by any business, but commonly viewed as `non-core' include:

• Facilities management


• Some elements of personnel management such as recruitment and training


• Cleaning services


• Printing services


• Catering services


• Property maintenance/management


• Legal services

• Computer hardware facilities


• Software development and support


• Inputting and processing transactions


• Preparing output and providing information


• Business interpretation and analysis, and


• Judgement, policy and service specification

This is an excerpt from the technical briefing `Contracting out the Finance Function' by the Chartered Institute of Management Accountants (CIMA).

Generally, all income of companies and individuals accrued in, derived from or remitted to Malaysia is liable to tax. However, income remitted to Malaysia by resident companies (other that companies carrying on the business of banking, insurance, air and sea transportation), non-resident companies and non-resident individuals are exempted from tax. From the year 2000, income tax in Malaysia is assessed on income earned in the current year. The assessment system was changed to a self-assessment system in stage staring 2001.

• Resident and non-resident companies

• Companies and person carrying on petroleum operations [“Petroleum operation”include searching for, wining or obtaining of petroleum in Malaysia (by drilling, mining, extracting, etc); all operations incidental thereto' sale or disposal of that petroleum; or transportation within Malaysia of that petroleum; but excludes transportation outside Malaysia; refining or liquefying or dealing with such products; or service involving the supply and used of rigs errricks ocean tankers and barges].

• Resident individuals with chargeable income of RM30,000 and above per annum 1-28%
• (after deduction of personal reliefs) 28%
• Non-resident individuals (not entitled to any personal reliefs)

• Special classes of income (use of movable property, technical services, 10%
• installation services on the supply of plant and machinery, etc.)
• Interest 15%
• Royalty 10%
• Contract payment on: account of contractor 10%
• Contract payment on: account of employee 3%

• Sales tax is imposed on certain imported and locally manufactured goods under the Sales Tax Act, 1972. The tax ranges from 5 – 25%. The general rate of sales tax is 10%. Food stuffs and building materials are subject to 5% sales tax: cigarettes, 25%; and liquor, 20%
• Sales tax is also imposed on petroleum and petroleum products according to specific rates.

• This tax is imposed on taxable services provided by taxable persons. Services include services provided by professionals (such as lawyers, engineers, architects, surveyors and consultants), advertising firms, private hospitals, insurance companies, communication companies, hotels, and restaurants.

• 4 Wheel drives 50% - 90%
• Motor cycles 10% - 50%
• Intoxicating liquor RM0.10–28 per litre
• Cigarettes RM0.081 per stick
• Playing card & manjong tiles 10%

• Industrial buildings 10%
• Computer and IT equipment 20%
• Environmental control equipment 40%
• Heavy machinery & motor vehicles 20%
• Plant & Machinery 20%
• Others 20%

• Industrial buildings 3%
• Computer and IT equipment 40%
• Environmental control equipment 20%
• Heavy machinery & motor vehicles 20%
• Plant & Machinery 14%
• Others 10%

Disposal of property (within 5 years) by a non-citizen or no permanent resident individual is subject to a flat rate of 30%

Almost all small business will experience ups and downs. There will be periods when demand for product is strong and customers are paying their bills on time. But there will also be periods when money may not come in as fast as it goes out. As the global economy falters, experts say small businesses must recognize costs early and start making modest cuts. The good news for small business is that cutting out the unnecessary costs can have an enormous effect on the bottom line. Even axing seemingly trivial costs, when added up, can deliver a serious boost to your margins.

Cost cutting is a healthy business practice that should be routinely performed, even when your business is doing well. At times like these, the task is fairly straightforward and you can perform the operation with clear objectives. On the other hand, when your business is in trouble and your financial crisis is growing, you begin to lose focus and start cutting every penny in every corner.

The good news is that cutting costs does not have to mean laying off staff. There are much less painful ways to do it, provided you know where to look.You need to invest some time to really find out if you’re getting best deals on office supplies, health insurance, even compensation packages for your employees. The best cost-cutting program measure is a program of cost control and work prioritizing which functions equally well in good times and bad.

Cut cost without hemorrhaging you business
“Immature strategy is the cause of grief”…
Miyamoto Musashi.

A lot of business people cut the wrong costs, sometimes even cutting the lifeblood of the business. They start cutting advertising and marketing costs, and guess what? They just cut their own throat. They just killed the resource that could bring their business out of its crisis. Instead of cutting marketing and advertising costs, an effective plan would be to increase your budget in those areas by shifting the funds from other places where you can cut costs.

Whether you are coping with a cash-flow crisis, or just looking for ways to cuts costs to improve your company’s profitability. One of the top concerns of any manager is keeping costs down.Your motivation can be near and dear to your heart. Say you’re the sole proprietor of a shop or you might just want that bonus check at year’s end. Whichever, your goal is the same. Here are 18 ways to help you get the job done.

1.IDENTIFY EACH OF YOUR BUSINESS COSTS
Cost Cutting Tip:
Start off by identifying your company’s spending pattern and devise ways to trim your costs. Keep updated records of all bills and receipts. Be aware of what your normal costs are so you can spot anomalies. Keeping track of expenses will also allow you to conduct monthly, quarterly and yearly reviews of your financials, to help you determine the most effective cuts.

2. ENHANCE YOUR LEVEL OF PRODUCTIVITY
Cost Cutting Tip:
Cutting cost in business without cutting capabilities and performance is achieved by optimizing each employee’s time. Is every employee spending the majority of his or her day “on the revenue line”- work that generates revenue for the firm? How to do this: Analyse how much time is spent on non-revenue producing activities. Replace those activities with revenue generating activities.

3. TRAVELLING: OPT FOR A CHEAPER ALTERNATIVE
Cost Cutting Tip:
If your business involves frequent out station travelling, your transportation cost is certainly an issue. Make maximum use of low cost airlines. Make a deal with a hotel in frequently-visited cities. Rent cars only when necessary. A good travel agent can save you time and money by managing costs and identifying savings for you. Teleconference if possible, or encourage clients to visit you.

4. WATCH YOUR PHONE BILLS
Cost Cutting Tip:
While cell phones may provide a great deal of convenience, your company’s phone bills may cause you a problem or two.Review your business telecommunications plan. Business telecommunications carrier brings out new plans all the time. Some of these telecommunications plans may be more suitable for your own business than the plans that you are on currently. You should regularly review your plans.

For making expensive overseas calls, you may as an alternative, consider using Skype for free instead and for conducting meetings you can use the Virtual Boardroom technology provided by Microsoft. In the office you can use MSN or Skype for chatting which will cut down on phone usage and other hidden costs which can add up quite quickly.

5. DOWNSIZE YOUR OFFICE SPACE
Cost Cutting Tip:
Move files and storage offsite so you can fit in a smaller office space. Storage costs are much less in a giant warehouse than they are in your office. We did this and got rid of 15 file cabinets worth of files that we rarely access (but can’t ditch!). But don’t stop there! Consider having employee’s tele-commute to save space for you and gas dollars for them. And how about that big lobby-do you really need all that space for your few walk in customers?

6. CHEAPER OFFICE SPACE
Cost Cutting Tip:
Can’t afford to rent much needed office space? Try reaching out to tenants of existing space. Ask for a few desks in their space, in exchange for taking over the office cleaning responsibilities. A lot of people have extra space that they are committed to. So a simple barter exchange like this can be a huge win-win.

7. MAINTAINTIGHT INVENTORY CONTROL
Cost Cutting Tip:
Careful inventory control can reduce storage and working capital costs. Make sure that adequate security measures are in place to prevent theft.

8. CONTROLl OFFICE EXPENSES
Cost Cutting Tip:
Paper pads, tape, pens and other office supplies have a way of disappearing from the office, increasing re-order costs. Don’t let employees take them home. Use toll-free numbers whenever possible, avoid overnight shipping, and use email and faxes instead of paying for postage.

9. RECYCLE
Cost Cutting Tip:
We work with our suppliers to recycle packing materials. Our raw materials used to come packaged with foam separators which the suppliers would not take back and which we had no use for, so they were just thrown away. Now we cut cardboard separators for them which we remove during production and return to our supplier for re-use. This resulted in cost savings for our supplier which was returned to us in reduced material costs.

10. NO PAPER = NO COST
Cost Cutting Tip:
Go paperless! Don’t print it. You can get an e Fax number to send and receive everything electronically. Don’t print it out… file it electronically. Share drafts of documents, designs, etc. electronically. Use e-mail or an online project management tool like Google Docs or Base Camp to share and comment on documents. If you don’t have to buy paper, envelopes, postage, file folders, ink or maintain your printer/fax – you can save hundreds of dollars per year – even in a small office. Plus – you’re going GREEN!

Another way to improve your costs is to limit color printing and copying when not necessary. Many copiers have a default setting to print color on emails, etc. that can be easily changed to black and white, resulting in an 85% savings per copy.

11. INTERNS
Cost Cutting Tip:
I find people looking to build their portfolio, resume or just get their foot on the door and barter services. I always have an intern from the local high school that comes in and helps us out and my labels were all designed by a recent grad from art school.

12. RE-EVALUATE ADVERTISING COSTS
Cost Cutting Tip:
Where is your advertising? Are you using too many display ads that don’t bring business, or coupon mailers that don’t seem to work? Keep track of where your customers are coming from and eliminate ineffective advertising cost.

13. DIVERSIFY YOUR BUSINESS OPERATION:
Cost Cutting Tip:
Place current employees into more than one role to ensure that you will not have to hire more than what is necessary to get the job done. A small but justifiable increase in pay for added responsibility beats paying someone new an entire pay package.

14. BE A SMART SHOPPER
Cost Cutting Tip:
Plan Ahead-Make a list of business supplies or equipment you’ll need in the future. Keep an eye out for stores that have big sales. Purchase the supplies when they go on sale before you need them. Planning is a big part of running a successful business. Buy used items – if your business equipment and supplies don’t need to be new. You can find used items at yard and garage sales, used stores, bulletin boards and newsgroups. Look for supplies with lower prices and better quality. Don’t just be satisfied with a few. You never know when you are going to find a better deal, but you never will if you are not looking for one.

15. REDUCE YOUR FIXED COSTS:
Cost Cutting Tip:
Consider using freelancers or contract staff. If a permanent person leaves, look at whether you can spread his or her role across remaining staff, or replace the individual with a freelancer or contract staff. It is easier to cut them out than it is your own staff base.

16. USING THE BUDGET
Cost Cutting Tip:
The best single tool for cost control, in good times or bad, is still the Budget Performance Report. It is important the budget is credible and the line items are understood to know which budget items are affected when the company is committed to spending money.

17. ENERGY SAVING
Cost Cutting Tip:
No matter where you work, recent increases in energy prices have probably pushed your utility bill higher than you’d like, but you don’t have to take it lying down. You want to save money as well as do your part to combat global warming. Avoid energy wastage by switching off lights and air conditioning when not in use.

18. RENEGOTIATE A BETTER DEAL
Cost Cutting Tip:
Small companies are finding that almost everything is renegotiable these days. The economic downturn is prompting business owners -- by necessity or by opportunity -- to re-examine contracts with suppliers, vendors or landlords and come up with creative deals. And in many cases, they are saving a substantial sum of money.

AWARENESS: EDUCATE YOUR STAFF
Cost control will never be accomplished by one person, no matter how dedicated, because costs are not incurred by any one person. For this reason, it is important that the entire staff is aware of the need and rationale for the program. Accordingly, the entire staff should keep the cost-control guidelines in mind in their daily jobs, because that is when the real cost-control decisions are made.

CONCLUSION:
Companies that fail to control costs often run up debts, and then servicing that debt then becomes another cost that cuts into profits further.

Every business has its outgoings; but it is true to say that many businesses spend more than they really need to on all of the day-to-day requirements. The problem is that when many business owners consider cutting costs, they often consider the larger and more expensive areas. For example, they might try to cut out one essential service altogether – and not surprisingly, they often end up frustrated with the specific decision taken.

Clearly the answer to reducing such outgoings is not to think in grand gestures like this, but rather a more beneficial solution would be to try and cut down on many different things by a small amount – and this can be easier to do than you might at first think.Additionally, cutting costs can be achieved via gains in productivity and decreases in waste and errors.

Employment income includes perquisites and benefits-in-kind. The Inland Revenue Board (IRB) has issue Public Rulings to explain what constitutes perquisites and benefits-in-kind and their differences.

For tax purposes, it is important to distinguish whether a benefit otherwise than in money provided to the employee by or on behalf of his employer is a perquisite or a benefit-in-kind. A perquisite can be in cash or in kind. If it is received in kind, the item must have money’s worth and is convertible into money, i.e., it can be sold, assigned, transferred or convertible into cash. Perquisites in kind comprise of assets such as watches, computers, share options or others items provided to the employee free of charge or at discounted prices. Perquisites also include the pecuniary liabilities of employees paid by the employers such as the employee’s income tax, electricity and telephone bills, child tuition or school fees, domestic help, gardener, driver and club membership.

Benefits-in-kind are benefits not convertible into money, even though they have monetary value. The amounts are equal to the value of the personal usage or enjoyment by the employee of assets and other benefits or amenities provided by the employer.

What are the non-taxable benefits-in-kind/perquisites?

All benefits or amenities provided for the employees by his employer or third parties in respect of having or exercising the employment are taxable accept for the following:

• Medical, dental or child are benefit
• Leave passage within Malaysia of not more than 3 times in a calendar year
• Overseas leave passage once in a calendar year limited to a maximum of RM3,000.00
• Benefits used by the employee solely for the purpose of performing his duties under the employment.
• Food and drinks provided free of charge
• Good and service (not convertible into money) of the employer at a total value of RM200.00 or less
• Free transportation between pick-up points or home and the place of work
• Insurance premiums which are obligatory for foreign workers as a replacement of SOCSO contributions
• Group insurance premium to cover workers in the event of an accident
• Service awards up to maximum of RM 1,000
• Pure gifts or testimonials for personal appreciation or for specific personal reasons

Perquisites are taxable under Section 13 (1)(a) of the income Tax Act 1967 whereas benefits-in-kind are taxable as income under Section 13 (1) (b). The distinction is important as perquisites are subject to scheduler tax deduction (STD) whereas benefits-in-kind are not. The correct categorizing of the benefits is also important as the value of living accommodation enjoyed by an employee under Section 13 (1)(c) is determined based on the actual rent paid by the employer or 30% of the employee’s gross income under Section 13(1)(a),whichever is the lower.

• Legal requirement
• Bookkeeping record are an excellent business management tool.

Many of business still operate using checkbook and receipt. It’s more efficient to go with an automated system, and there are now many bookkeeping software packages on the market. Most of the account software systems don’t require CPA to operate and interpret it. Most of the windows account software is very user friendly.

Most business use one of the two basic accounting methods in their bookkeeping system: Cash basic and accrual basic. Cash basis is the simplest one between the two and is used for small business. Income is recorded when it is received, and expenses are reported when they are actually paid. From tax point it is sometimes advantageous for a new business to use the cash basic accounting.

With accrual method income and expenses are recorded as they occur, regardless of whether or not cash actually changed hands. Credit sales are excellent examples of this. How to decide which book keeping system should use? The accrual method is usually needed if your business is structured as Sdn Bhd.Business with inventory must use this method. This is highly recommended for any business that sells on credit, as it more accurately matches income and expenses during a given period. Where as cash basic is may be appropriate for a small, cash basic business or a small service company.

Accounting system has the following key components:

1. Chart of accounts
2. General Ledger
3. Accounts receivable
4. Inventory
5. Fixed asset management
6. Accounts Payable
7. Payroll

CHART OF ACCOUNT

This is the first step in setting the accounting system for your business. This will decide what accounts you have to track for your business. Account numbers are used as an easy account identification system. In general two or three number system will suffice for most of the business.

GENERAL LEDGER

After chart of accounts we need to establish the general ledger of the system, which is the engine that actually runs your business on a daily basic. Every account that is in your chart of accounts will be include in the general ledger and also in the same order as specified in chart of accounts. General ledger does not include every single accounting entry for a given period. It reflects only the summary of the transaction made. Important component for any general ledger are source documents. Two examples of sources documents are copies of invoices to customer and invoices from suppliers. Source document are very critical and very important for Audi trail. Source documents are also important required document for LHDN at tax time. Other examples of source documents are cancelled checks, utility bills, payroll tax record and loan statements.

General ledger entries are double entries. For every financial transaction in your business money goes from one place to another. For example, when you write a payroll check money goes from payroll account into employees account as an expense. When u sells an item from your business, you record a sale income but must have a journal entry for accounts receivable. The system used in recording entries on general ledger is of debits and credits. In general ledger debits always go on the left and credits go on the right.

ACCOUNTS RECEIVABLE

If you plan to sell goods, or provide services on account in your business there should be a method of tracking who owes you how much and when it is due. If you are selling to different customers then the best way to track is through an automated system. This will endure the billing and collections are done in a timely manner.

FIXED ASSETS

Fixed assets are items that are for the long term use of the company. Fixed assets include computer, vehicles, land, building and other machinery. In the accrual system of accounting, fixed assets are not fully expensed to the company. But, expensed over a period of time that coincides with the life of an item. This process is called as depreciation of the item. Most business will keep a fixed assets sub ledger with the deprecation schedule.

ACCOUNT PAYABLE

Account Payable sub ledger is similar to the one that used to track accounts receivables. The difference is the account payable occurs when you purchase inventory or other assets on credit from a sub layer. It is important to track the account payable in a timely manner. Many supplier relationships with your business may be damaged due to poor accounts payable system. Good automated tools will enable you to alert when to pay.

PAYROLL

This is one of the most challenging subjects for a new business owner. There are many federal and state laws regulating what you have to track related to a payroll. Failure in doing so will result in heavy fines.Many business owners use outside payroll services to comply with the applicable laws. It saves lot of time for the business owner to keep out of trouble with the law and saves time that can be devoted to something else in the business.

COST ACCOUNTING

Cost accounting is a process of allocating the cost associated with generating a sale, both direct or indirect. Direct cost includes all other material and labor. Indirect cost include all others cost associated with generating the product .By knowing  the total cost associated for generating a product you can determine the items which are profitable to make.

FINANCIAL STATEMENTS

One of the primary benefits of a good book-keeping system is to generate timely useful financial statements. Most software packages offer capability of producing balance sheet, income statement and cash flow statement.

Financial Statement:

1. Enable you to asses the short term working capital
2. Set targets
3. Analysis of improving the profit margins
4. Efficient organization of sales and expenses
5. Better tax planning
6. Planning for employee
7. Manage proactively
8. Helps in borrowing money from financial institutions
9. Financial planning for investors &
10. Making the business more profitable

Income statement measures the revenue sources against business expenses over a period of time. Major component in the income statement are

1. Sales - This is the gross revenue generated from a sale. This is the main component generating from the income for your business
2. Cost of god sold - This is the direct cost associated in generating the sales. These costs include all kinds of resources which include direct labor, manager salaries and other operating costs.
3. Gross profit - It represents the amount of direct profit associated with the company.
4. Operating expenses-These are the general selling expenses; those are the general selling expenses, those are necessary to run the business.
5. Operating Profit - This is the amount of profit earned during the normal course of operation .It is computed by subtracting the operating expenses from gross profit
6. Other income and Expenses - This represents those return that do not occur during the normal operation of business
7. Net profit before taxes - This is the amount earned by business before paying taxes
8. Income Taxes - Total amount of state and federal taxes paid
9. Net profit after taxes - This is the amount of earnings for your business computed by subtracting taxes paid from net income before taxes.

Balance sheet provides snap shot of business assets, liabilities and owners equity for a given time

1. Asset - These are the asset that can be converted to cash in a year or less. They include cash, stocks, other investment account  receivable and prepaid expenses
2. Fixed Assets - These are the tangible assets of a business that will not be converted to ash within a year. These include land, buildings, machinery and vehicles.
3. Intangible assets - These are the assets which can not be touched or seen. These include franchise rights, good will, agreements and other items.
4. Other Assets - These include cash value of insurance investment properties and all other dues
5. Liabilities - These are the obligation for your business that are due. These include notes payable on lines of credit and other short term loans, current maturities of long term debt, account payable ,expenses and taxes, payroll that is due to employees and amounts due to stock holders.
6. Long term liabilities - These are the obligations of the business that are not due for at least one year. These consist of bank debt or any loans payable outside the twelve month period.
7. Owner’s equity - This is the total amount invested by stock holders plus accumulated profit of the business.

In the earlier sessions you have seen the difference between accrual and cash flow basic of accounting. The accrual basic of business it more accurately matches the revenue sources to the expenses however it is important to analyze the actual cash flowing in and out of the business.

Cash-Flow statement is divided into 4 categories:

• Net cash from operating activities - Operating activities are daily internal activities of the business. These either require cash or generate the cash. These include cash collection from customers, cash paid from customers, cash paid to sub layers and employees, cash paid from operating expenses interest and taxes
• Net cash flow investment activities - investment activities are discretionary investment made by the management. These primarily consist of the purchase or sale of any equipment etc
• Net cash flow from financing activities - Financing activities are those external sources which include sales of common stock changes to short term and long term loans and dividends
• Net change in cash and marketable securities - The result of the first three calculations are use to determine the total changes in cash and marketable securities caused by fluctuations in operating, investing and financing cash flow

Further terminologies you need to understand

Assets
An asset may be defined as anything of use to future operations of the enterprise and belonging to the enterprise. For example building, land, machinery, cash, debtors (amount due from customers) goodwill etc.

Equity
In board sense the term equity refer to total claims against the enterprise. It is further devided into two categories:

1. Owners claim-capital and
2. Outsider’s claims-liability
3. Liability: Amount owed by the enterprise to the outsiders i.e. to all others except the owner. For example, trade creditors, bank overdraft etc.
4. Capital: The excess of assets over liabilities of the enterprise. It is the difference between the total assets and the total liabilities of the enterprise. For example, if on a particular date the assert of the business amount to RM 1,000,000 and liabilities to RM 300,000 then the capital on the date would be RM 700,000.It is also known as net worth.

Expenses/Costs:
Expenditure incurred by the enterprise to earn revenue is termed as expenses or cost. Distinction between expense and asset is that the benefit of the former is consumed by the business in present whereas in latter case benefit will be available for future activities of the business. Examples of expenses are raw materials consumed salaries etc.

Loss:
The term is used to convey, at least, two different meanings, first it refer to the result of the business for a period when expense exceed the revenue. For example, if sales are RM 10,000 and expenses are RM 11,000 the loss will be RM 1,000. Second- It describe those effort which fail to earn revenue. For example-unsaleable stock, loss due to fire, theft, accident etc.

Proprietor/Owner:
The person who invests his money or money’s worth and bears the risk of the business.

Drawings:
Money or values of goods belonging to business used by the proprietor for his personal use.Goods include all merchandise commodities which are purchased by the business for selling.

Trade Debtor:
Person who owes money to the business. It happens when goods are sold on credit.

Trade Creditor:
Person to whom the business owe money. It happens when goods or materials are purchased by the business on credit.

Transaction:
Any exchange (dealing) of goods or services, for cash or on credit by the business with in any other business.

Entity:
All elements of financial statements are in relation to a particular entity which may be business enterprise, an educational or charitable organization, a government unit, a natural person or the like. An entity may comprise to or more affiliated entities and may not necessarily correspond, with ‘legal entity’. Thus, the accounting information is recorded, compiled and presented with reference to identifiable entity. The term ‘other entity ‘refers to a subsidiary company that is a part of the same entity as its parent company that is a part of the same entity as its parent company in consolidated financial statement but is an ‘other entity ‘ in separate financial statement of its parent.

Net worth:
Is also known as “ownership equity” or “stockholders”, equity” or “capital”. It is the differences between total assets minus outside liabilities. Alternatively net worth is the sum of capital plus retained earning

The Accounting Cycle:
After taking decisions such as selecting a business, making decision about the amount of capital to be invested, selecting suitable site, acquiring equipment supplies etc., selecting staff, getting customers and selling the goods etc., business man finally resorts to record keeping.For all types of business organizations, transactions such as purchase, sales, manufacturing and selling expenses, collection from customers and payment to supplier do take place. These business transactions are recorded in a set of ruled books, such as journal, ledger, cash book etc; in modern times all the records are maintained on a computer using computer software; unless these transaction are recorded properly, he will not be in a position to know where exactly he stands. Therefore, for any business record keeping is of foremost importance.

Following is the complete cycle of accounting:

1. The balance of accounting ; from opening balance sheet and day-to day business transaction of the accounting year are first recorded in a book known as Journal
2. Periodically these transactions are transferred to concerned accounts, known as ledger accounts.
3. At the end of every accounting year these accountant are balanced and a trial balanced is prepared.
4. Then the final accounts such as Trading and profit & loss accounts are prepared.
5. Finally a Balance sheet is made which givens the financial position of the business at the end of the period .

Responsibilities of an accountant:
In modem times traditionally, the accountant was expected to compile and present the financial information to the owners of the entity at the end of the accounting period. But with the advent of cost accounting and financial, management accounting and financial management the responsibility and field of accountant’s function have grown enormously.

The function of accounting beyond the traditionally accepted double entry routines can be grouped under:

1. Finance Function
2. Control Function
3. Planning Function

Finance function:
Every business faces the problem of raising and using the funds

The responsibility of accountant under finance function is to ensure that::

1. Funds are obtained at the lowest cost and
2. Funds are optimally used i.e.; highest return is obtained

Control function:
Accountant has to do the following to discharge his responsibility of being the controller To communicate the goal as approved by the management to individuals in their respective field. To make all the managers and various other person leading their units ,aware of their responsibility and assist hem in achieving their goal as efficiently as possible .Look  after coordinated of various activities of all organizational units so as too optimize result. Evaluate the performance and the degree of achievement of various responsibility centers as compared to the goals set for them and asset their efficiency. Identify areas of unsatisfactory performance and assist in the formulation of corrective measure at both ends.

Planning function:
The process of planning involves long term decision as well as short term action. In the short-term decision has to be taken regarding. Selection of one alternative out of many e.g.. Bicycle manufacture should decide whether to manufacture all the parts of the bicycle himself or purchase the part and only to assemble

Profit maximization or loss minimization:
For problem involved in planning function accountant has to depend not only on accounting information .As regards long term planning, the task is plan for continuity and development of the firm.