ACCOUNTING Common Knowledge #1

      *Note: The following content has been chosen and collected from various sources | 
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Learn English Through Topics. Accounting. Part 1. Vocabulary.

Learn English Through Topics. Accounting. Part 2. Speaking. Ask and Answer.

1. What are the different types of accounting?

- Financial Accounting – This branch of accounting records, summarises and reports the business transactions that take place over a time period in an organization. It is required in both the private and public sectors. 

- Administrative Accounting – Administrative accounting is focused on the administrative aspects of the company and is used above all to assess the fulfillment of the established objectives and improve the implemented strategy. It is very useful for making forecasts and planning the actions and resources to be used.

- Tax Accounting -Tax accounting helps to register and prepare reports related to tax returns to the public treasury and payment of taxes.

- Cost Accounting – This type of accounting is more focused on companies of an industrial nature. It helps to make a detailed analysis of the unit costs of production, sales, and, in general, the production process that the company carries out.

- Management Accounting – Management accounting has a broader vision than cost accounting since it records all the economic and financial information of the company to be able to make short-term and long-term decisions.

2. Which accounting platforms have you worked on? Which one do you prefer the most?

*Note: Describe the accounting platforms (QuickBooks, Microsoft Dynamic GP, etc.) that you have worked with and which one you liked the most.

Show you have a good understanding of the accounting platform you use. You can further specify what type of businesses use them. Generally, small and growing enterprises use the affordable plan of  QuickBooks Online for creating invoices, tracking expenses, and utilizing the software’s built-in reports. 

3. What is working capital?

Working capital is calculated as current assets minus current liabilities, which is used in day-to-day trading.

In a simple accounting scheme, the concept of working capital focuses on the capital resources that a given company can count on in the short term to operate. These resources owned by the company are the cash, the portfolio of financial products, and other investments made by the company.

4. Give a suggestion to improve the company’s working capital flow.

In my opinion, the stock on hand can be the key to improving the working capital of the company. Of all the components of working capital, the stock is something we can control. We can pressure our debtors to pay us instantly, but we cannot have direct control over them because they are separate legal entities and, in the end, they are the ones who give us business.

We may tend to delay payments from our suppliers, but it ruins business relationships and hinders goodwill in the industry. Also, if we delay payments, they may not supply goods in the future. Maintaining liquidity in the form of funds in the bank can help the flow of working capital, but it comes at an opportunity cost.

With all of this in mind, I personally believe that inventory management can be of great help in improving the working capital of the company. Over-stock should be avoided and stock turnover rates should be high.

5. How do you maintain accounting accuracy?

Maintaining the accuracy of an organization’s accounting is an important activity as it can result in a huge loss. Various tools and resources can be used to limit the potential for errors to creep in and address them quickly if any errors arise. My favorite is MS Excel.

Some of the most common ways of maintaining accuracy in accounting are:

Identify revenue streams

Keep a close eye on invoices and receipts

Prepare tax returns to avoid penalty

Prepare financial statements

Keep tabs on deductible expenses

6. Since you mentioned that MS Excel is your favorite, please give us three cases where Excel will make your life easier.

Excel saves a lot of time. Automating repetitive and predictable tasks with macros is one example. This allows one to format, filter and analyze vast sets of data within seconds.

Excel is highly customizable. Accountants need to create reports with tables and charts in excel. The same can be re-used for creating other reports without having to use or create new templates.   

Excel is convenient for comparing financial datasets. It helps one in tracking financial records and see from which source the cash flow is generating.

7.  What is the difference between ‘accounts payable (AP)’ and ‘accounts receivable (AR)’?

Accounts Payable: The amount a company owes because it purchased goods or services on credit from a vendor or supplier. Accounts payable are liabilities.

Accounts Receivable: The amount a company has the right to collect because it sold goods or services on credit to a customer. Accounts receivable are assets. 

8. What are the common mistakes in accounting?

The most common mistakes in accounting are: 

- Mixing personal accounts with that of the company

- Little communication between the company and the accountant

- Not keeping a backup

- Misallocated resources

- Not saving the receipts

- Performing manual accounting

- Not keeping the accounting books up to date.