GESTIÓN DE FORMACIÓN PROFESIONAL INTEGRAL

PROCEDIMIENTO DESARROLLO CURRICULAR

GUÍA DE APRENDIZAJE

AN ACCOUNTANT’S JOB PROFILE: FUNCTIONS OF ACCOUNTING

The following paragraphs examine the functions of accounting and what role does an accountant play in discharging
these functions.

An accountant
Is a person who does the basic job of maintaining accounts as he is the man who is engaged in book keeping. Since
the managers would always want to know the financial performance of the business. He/she prepares profit and loss
account which reports the profits/losses of the business during the accounting period, Balance Sheet, which is a
statement of assets and liabilities of the business at a point of time, is also proposed by all accountants. Since both
statements are called financial statements, the person who prepares them is called a financial accountant.

Accounting information
It serves many purposes. A part from revealing the level of performance, it throws light on the causes of weakness and
deviation from plans (in any). In this way an accountant becomes an important functionary who plays a vital role in the
process of management control, which is a process of diagnosing and solving a problem. Seen from this point of view,
an accountant can be referred to as a management accountant.

Tax planning
It is an important area as far as the fiscal management of a company is concerned. An accountant has a suggestive but
very specific job to do in this regard by indicating ways to minimize the tax liability through his knowledge of
concessions and incentives available under the existing taxation framework of the country.

An accountant can influence a company even by not being an employee. He can act as a man who verifies and certifies
the authenticity of accounts of a company by auditing the accounts. It is a strictly professional job and is done by
persons who are formally trained and qualified for the purpose. They have an educational status and a prescribed code
of conduct like the Chartered Accountants in India and Certified Public Accountants in USA.

Information management
It is a key area and many organizations are known to have perished because they failed to recognize this as an
important function of an accountant because information system is imperative for effective cost control, to forecast cash
needs and to plan for future growth of the organization.

Define the following words:

 Account: CUENTAS
 Book keeping: LIBRO CONTABLE
 Financial performance: DESEMPEÑO CONTABLE
 Profit: GANANCIAS
 Loss : PERDIDAS
 Balance sheet: BALANCE GENERAL
 Statement : DECLARACION
 Assets : ACTIVOS
 Liabilities : PASIVO

GFPI-F-019 V3
 SERVICIO NACIONAL DE APRENDIZAJE SENA
Procedimiento de Desarrollo Curricular
GUÍA DE APRENDIZAJE

 Fiscal management : GESTION FISCAL

 Tax: IMPUESTO
 Taxation: IMPUESTOS
Match the concept with the key words

1 Accrual: ( 4) Total amount received from sales of goods/services.

2 Cost: (1 ) Recognition of revenues and costs as they are earned or incurred. It includes recognition
of transaction relating to assets and liabilities as they occur irrespective of the actual
receipts or payment.
3 Expenses: ( 5) A cot relating to the operations of an accounting period.

4 Income: ( 3 ) The amount of expenditure incurred on or attributable to a specified article, product or

activity.
5 Revenue: (9 ) Excess of revenue over expenses.

6 Loss: (7 ) Generally refers to the amount invested in an enterprise by its owner.

7 Capital: (10 ) An account usually of the nature of a reserve or provision which is represented by
specifically Ear Market Assets.
8 Fund: (6) Excess of expenses over revenue.

9 Gain: (2 ) Expenditure on assets held to earn interest, income, profit or other benefits.

10 Investment: ( 12 ) A monetary benefit, profit or advantage resulting from a transaction or group of

transactions.
11 Liability: ( 8 The excess of revenue over expenses during a particular accounting period

G )

12 Net Profit: (11 ) The financial obligation of an enterprise other than owners’ funds.

In the following paragraph identify the following aspects

An accountant is a person who does the basic job of maintaining accounts as he is the man who is engaged in book
keeping. Since the managers would always want to know the financial performance of the business. He/she prepares
profit and loss account which reports the profits/losses of the business during the accounting period, Balance Sheet,
which is a statement of assets and liabilities of the business at a point of time, is also proposed by all accountants.
Since both statements are called financial statements, the person who prepares them is called a financial accountant.

Adjectives:
Present simple sentences:
The number of sentences in the paragraph above:

SELF ASSESSMENT QUESTIONS

1. Define accounting. What purpose is served by accounting?
 SERVICIO NACIONAL DE APRENDIZAJE SENA
Procedimiento de Desarrollo Curricular
GUÍA DE APRENDIZAJE

2. What are the main roles and activities of an accountant?

3. Read the article bellow and explain the difference between Financial accounting and Management accounting

Financial accounting
As mentioned earlier, financial accounting deals with the preparation of financial statements for the basic purpose of
providing information to various interested groups like creditors, banks, shareholders, financial institutions, government,
consumers, etc. Financial statements, i.e. the income statement and the balance sheet indicate the way in which the
activities of the business have been conducted during a given period of time.

Financial accounting is charged with the primary responsibility of external reporting. The users of information generated
by financial accounting, like bankers, financial institutions, regulatory authorities, government, investors, etc. want the
accounting information to be consistent so as to facilitate comparison. Therefore, financial accounting is based on
certain concepts and conventions which include separate business entity, going concern concept, money measurement
concept, cost concept, dual aspect concept, accounting period concept, matching concept, realization concept and
conventions of conservatism, disclosure, consistency, etc. All such concepts and conventions would be dealt with detail
in subsequent lessons.

The significance of financial accounting lies in the fact that it aids the management in directing and controlling the
activities of the firm and to frame relevant managerial policies related to areas like production, sales, financing, etc.
However, it suffers from certain drawbacks which are discussed in the following paragraphs.
 The information provided by financial accounting is consolidated in nature. It does not indicate a break-up for
different departments, processes, products and jobs. As such, it becomes difficult to evaluate the performance
of different sub-units of the organization.
 Financial accounting does not help in knowing the cost behavior as it does not distinguish between fixed and
variable costs.
 The information provided by financial accounting is historical in nature and as such the predictability of such
information is limited.

The management of a company has to solve certain ticklish questions like expansion of business, making or buying a
component, adding or deleting a product line, deciding on alternative methods of production, etc. The financial
accounting information is of little help in answering these questions.

The limitations of financial accounting, however, should not lead one to believe that it is of no use. It is the basic
foundation on which other branches and tools of accounting analysis are based. It is the source of information, which
can be further analyzed and interpreted according to the tailor-made requirements of decision-makers.

Management accounting
Management accounting is ‘tailor-made’ accounting. It facilitates the management by providing accounting information
in such a way so that it is conducive for policy making and running the day-to-day operations of the business. Its basic
purpose is to communicate the facts according to the specific needs of decision-makers by presenting the information in
a systematic and meaningful manner. Management accounting, therefore, specifically helps in planning and control. It
helps in setting standards and in case of variances between planned and actual performances, it helps in deciding the
corrective action.
 SERVICIO NACIONAL DE APRENDIZAJE SENA
Procedimiento de Desarrollo Curricular
GUÍA DE APRENDIZAJE

An important characteristic of management accounting is that it is forward looking. Its basic focus is one future activity
to be performed and not what has already happened in the past.
Since management accounting caters to the specific decision needs, it does not rest upon any well-defined and set
principles. The reports generated by a management accountant can be of any duration short or long, depending on
purpose. Further, the reports can be prepared for the organization as a whole as well as
its segments.