This guide is primarily aimed at fresh graduates, entry level job hires, professional students, and any individual related to the profession of Buy Verified Binance Accounts (and management accountancy in particular), who wishes to have a quick overview of how a set of management accounts can be produced and what entails in its production, without having to read a 200 page book. Most of the knowledge set out henceforth is from the point of view of working in a service based industry and assumes the reader to have a reasonable knowledge of the fundamental concepts of accounting.
The scope of this guide is to give the readers a sequence of activities that I have followed, in my own experience, to put together a monthly reporting pack for my senior management team. This sequence of activities and the importance that I attach to each activity can be very different for the line of business that you are in. Having said that, I do expect that most of you will develop a more vivid and succinct picture of the production process, which you can then imitate and integrate into your own particular circumstances.
So, let’s begin!
What are we trying to produce?
In most organisations, the board or senior management requires the management accountant/chief accountant to produce a monthly profit and loss account/income statement, so that the organisation’s performance against set budgets (mostly prepared at the beginning of each financial year) and expected forecasts (mostly updated at each month end) can be gauged. A monthly management accounting reporting pack does not only include the monthly income statement, but a range of other useful reports too. However, an income statement does constitute the bulk of the reporting and this is what we will try to produce in this guide.
In a nut shell, through a certain set of activities and for a given period (usually a month), we determine: the revenues generated by the business, the costs incurred in the production of such revenues (commonly known as ‘cost of goods/services sold’) and the costs incurred to provide support to such revenue generation and goods/services production. This cost is sometimes referred to as the central overheads’ costs or support functions’ costs or the service-centre costs.
What you should know before you begin production?
Most businesses will use a “Chart of Accounts” in their accounting systems (may it be: Sage, SAP, Oracle, SUN, Viztopia etc.) to classify and record various types of transactions involving differing kinds of assets, liabilities, capital, revenues, and costs.
A Chart of Accounts or COA, as I like to call it, is a list of all nominal ledger accounts that a business intends to use to record its business transactions. This list of accounts can be in the shape of numbers, alphabets or alpha-numeric values. Due to my own experience, I prefer numbers.
So, to give an example, our full COA might range between the numbers 0001 and 9999 and within this range, we can have multiple ranges, each representing an asset, liability, capital, revenue or costs type. As an example, the range 5000-5999 might only represent different kinds of revenue streams for a business and the range 1000-1999 might only refer to all fixed assets held by the business.
These are just examples of how the COA could be divided. You need to know what range/s of nominal account codes in your business’s COA constitutes the revenues, the cost of goods/services sold, the central overheads, the assets, the liabilities, and the capital.
You will not be able to understand the income statement (which is what you are essentially trying to produce), unless you understand the Chart of Accounts. The income statement is basically reading all data held in the COA range/s relating to revenues and costs for a given month/period.