Accounting is the systematic recording of commercial transactions of any business, including those operating in the finance sector. This back-office function plays an important role in helping owners operate their businesses successfully in the market. Only then, can they keep track of the revenue and operating expenses of their activities. The difference between this income and cost enables them to determine whether they are earning a profit. Otherwise, they will obviously be incurring a loss. The owners also get to know the monetary value of the assets they own and their liabilities to others. Accounting provides the owners with the quantitative information they need to make decisive decisions.
Scott Tominaga – What information does accounting provide to the stakeholders of finance companies?
Scott Tominaga is a financial expert from America with a wealth of experience spanning 17 years. He specializes in hedge fund investing and providing valuable services to his clients. He has been holding the post of Chief Operating Officer in PartnersAdmin LLC since 2008. This is a popular company in California specializing in providing high-quality back-office solutions to businesses in the finance sector. It also has offices in other places in the state like Los Angeles and San Diego. Since its inception, the company focuses on implementing the best practices to minimize its customers’ systematic risks. In doing so, it helps in promoting and safeguarding the interests of their customers’ investors.
He explains accounting provides owners and other key stakeholders of companies in the finance sector with critical information. On the basis of this, they can accurately evaluate the financial performance of their businesses. Otherwise, taking decisive decisions affecting their companies’ activities can turn out to be difficult for them. For instance, owners need to know how much revenue various investment products generate in comparison to their costs. Only then can they make decisions on whether or not to continue with them. The government determines the tax liability of businesses from the data their accounting department submits when filing various returns. The accounting and other statutory records businesses have to maintain enable investors how safe their money is with the company. They also get to know the value of the returns on their investment.
What are the three key accounting records all businesses need to maintain?
He further clarifies that all businesses, even the ones operating in the finance sector, need to prepare the following three statements:
- The income statement gives businesses in-depth information about the profits they earn or loss sustained for a specific period,
- Balance sheet states clearly the financial position of the businesses as on the specific date in terms of their assets and liabilities, and
- The cash flow statement which links the balance sheet and income statement to indicate the money the businesses earn and spend.
The above three accounting statements enable businesses to evaluate their performance, meet statutory guidelines, and file various tax returns.
Scott Tominaga sums up by saying accounting is the lifeline that enables owners to run their businesses. The back-office function provides them important information necessary to evaluate the performance of their activities. Moreover, they can even comply with various statutory regulations that the government stipulates by preparing popular accounting records that establish their financial position in the market.
