Biggest Accounting Myths Busted

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Transcript of Biggest Accounting Myths Busted

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For businessmen, accounting would draw feelings ofdrudgery and waste of time. Accounting for years has beenseen as a non-value adding department for Indianbusinesses.

However times have changed and so has accounting.Information technology, value added taxation approach andfierce competition has led to making accounting one of themost important aspects of running a successful business.

Let’s take on some of the myths that have formed aroundthis subject and try to uncover the truth:

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1. RECORDING KEEPING LEADS TO MORE TAXATION:

Many businesses avoid precise record keeping as they feelthat keeping a lot of records means one day we will have topay more taxes. In fact if you have clear record keeping it willhelp you determine the exact tax liability. You can save timein retrieving information and take faster and betterdecisions.

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2. I DON’T DO BUSINESS, SO I DON’T NEED ACCOUNTING :

What most professionals / investors think that as they don’toperate a business; they don’t need accounting. Accountingis needed to assess the tax liability for any individual havingto pay income tax and earning apart from salary.

So if you have income from investments / consulting /rentals it would be helpful to keep proper accounts. It willhelp you get loans in future and also determine yourprofitability year on year.

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3. I KNOW HOW TO OPERATE A COMPUTER, I CAN WRITEMY OWN ACCOUNTS:

Accounting is not to be confused with mere data entry. A lotof concepts of accounting have to be taken care off whilewriting books of accounts.

Professional accountant can guide you with correct picturefor your business. There are a lot of rules and regulationwhich are to be considered while writing books of accountand these rules keep changing.

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4. ACCOUNTING HAS NO BENEFIT FOR BUSINESS:

One of common excuses that we hear for improperaccounting is that that it has not “real” benefit for business.This can’t be further than the truth.

A vital component for decision making is past performance.Accounting gives the past performance information to thedecision maker for taking decisions on facts and figuresrather than gut feel. In fact when a company is sold thevaluation is purely based on the accounting incomereported. So accounting is business!

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5. ACCOUNTING IS A ONE MAN DEPARTMENT:

So many of small and medium businesses think that keepingone accountant is all that they need for maintaining properbooks of account. They forget that in case they hire a lowsalaried person he might not know every aspect ofaccounting and in case they hire a high salaried person withexperience he might not get satisfied with job profile.

Also accounting comes with set of consultants like: Auditor,Income Tax, VAT, Service Tax, Labour law etc.

So accounting is not a one man show.

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6. FULL TIME ACCOUNTANT NEEDED EVEN FOR PARTTIME WORK:

To address the above challenge many businessowners employ a full time accountant and keep himunder employed as still consultants are needed.

There are companies like CHOKSI TAX SERVICESwho provide part time accountants at an affordablerate. Accountant not only takes salary but needsprecious real estate space, monitoring andguidance. A businessman may not have the timeand the skills require to recruit and retain anaccountant. Hence it is advisable to ratheroutsource accounting rather than keep an underemployed costly resource.

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7. REPORTS NOT REQUIRED TO KNOW HOW MUCH I EARN:

Many business people think that they know how much theyearn from their business. Reports cannot tell them morethan what they already know.

However sometimes the devil lies in the details. Sometimesaccounting reports like cash flow, product wise profitabilityand branch wise profitability help businessmen knowsomething they don’t : how to earn more profits.

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8. BOOK PROFITS HAVE NO RELATION WITH ACTUAL PROFITS:

A lot of learned people think that what profit shown in books hasno relation with actual profits. “My bank and cash balance is myprofit, whatever mentioned in books is not relevant”. With such amind-set people don’t invest time and money in the accountingdepartment which eventually results in degradation of function ofaccounting from a management tool to merely a cost burden.

It is true that sometimes the accounting standards differ then the“owners” standard of calculating costs and income. For that youcan create a separate MIS which can show the profit in the waythe decision maker wants it. Year-on-year such standards have tobe same then we can easily compare and contrast theperformance.

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9. OUTSOURCING OF ACCOUNTING IS COSTLY:

The total cost of running a full-fledged accountingdepartment with proper consultants is all the more costlythan outsourcing.

You need to consider the cost of recruitment, training, realestate, monitoring and overheads for the accountingdepartment.

Hence it is advisable to compare your costs with cost ofoutsourced accounting take an informed decision.Outsourcing your non-core function something whichsuccessful companies have been doing since long, it may beyour time. Consider this too!

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Accounting is one of the most important aspect of yourbusiness. Let professionals handle and see the difference itmakes to your business. Most of the businesses who haveoutsourced accounting feel that an outsourced departmentis beneficial than an in house one, which is proven by hardlyany client of CHOKSI TAX SERVICES going back to an inhouse department. The total cost of running a full-fledgedaccounting department with proper consultants is all themore costly than outsourcing.

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The main objective of Choksi Tax Services is to provide services tosmall to medium businesses so they can concentrate on their corebusiness functions and look towards increasing their profitability. CTStakes care of all your accounting work and reducing the businessowner’s time spent on such time consuming but essential tasks. Weoffer our professional accounting services through our team of highlyskilled and experienced accountants. By hiring our accountingservices, our clients (business owners) have saved up to 30% of costscompared to the costs of hiring in-house staff to perform thesefunctions.

Finding the right accountant to suit your business needs cansometimes be just as challenging as sorting out your accountsyourselves. We offer a very personal service and treat all our clientsthe same whether being a small proprietorship, SME enterprise orlarge corporate.

ABOUT CHOKSI TAX SERVICES

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Reach us for more information & meet our team ofexperts by calling on 1800–123–2100 (Toll Free), or09909015009

Mail us at [email protected].

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