Whether an accountant is working with a private person, a small business or a multinational corporation, their role is the same: To ensure that the correct level of taxes are being paid, and that the entity’s financial records are complete and in order. One of the key ways that an accountant can be different is if they decide to use a new approach to managing the books, and the type of accountancy will usually depend of the amount of money that is turned over every financial year.
The first method is known as the cash method. Unless you run a multimillion-pound, money-spinning machine, it’s likely that this will be the approach used by an accountant to balance your books. With the cut-off date for the financial year being April 5, and the new period beginning on April 6, it’s important to consider how income will be recorded as the conclusion of the tax year draws close. If you start a contract that’s worth �£1,000 on April 4, but you won’t be paid until the work is approved in full by your client on April 15 when you are due to finish the project, these earnings would carry over to the next financial year even though you commenced work beforehand.
As larger businesses usually have far more complex assets to worry about, advance earnings and expenses that are established before April 5 will usually be included into one 12-month period for ease, and this tactic is known as the accrual method. Even though this may seem like a disadvantage, but for entrepreneurs that are looking to secure investment within their company, it can be vital. After all, a strong financial outlook with good dividends means that you will be able to inject more capital into the financial year ahead of you.
The first method is known as the cash method. Unless you run a multimillion-pound, money-spinning machine, it’s likely that this will be the approach used by an accountant to balance your books. With the cut-off date for the financial year being April 5, and the new period beginning on April 6, it’s important to consider how income will be recorded as the conclusion of the tax year draws close. If you start a contract that’s worth �£1,000 on April 4, but you won’t be paid until the work is approved in full by your client on April 15 when you are due to finish the project, these earnings would carry over to the next financial year even though you commenced work beforehand.
As larger businesses usually have far more complex assets to worry about, advance earnings and expenses that are established before April 5 will usually be included into one 12-month period for ease, and this tactic is known as the accrual method. Even though this may seem like a disadvantage, but for entrepreneurs that are looking to secure investment within their company, it can be vital. After all, a strong financial outlook with good dividends means that you will be able to inject more capital into the financial year ahead of you.
