If you’re running a business, it’s important to understand accounting concepts well. One key concept is the purpose of control accounts. These special accounts are used to track and report the financial status of specific areas or divisions within a company. But how does this apply to your business? Edgewater CPA Group discusses this and why you need control accounts to manage business finances effectively.
What are Control Accounts & Their Purpose
Control accounts are used in accounting to help ensure the accuracy of financial statements. The purpose of these accounts is to provide a check on the math of individual transactions and to provide a means of reconciling errors. Controls are generally maintained by businesses with complex financial structures, such as multinational corporations. When control accounts are used, businesses can be confident that their financial statements accurately reflect their true financial position. This information allows businesses to make sound decisions based on accurate information.
Examples of These Accounts
There are many different types of accounts, but some of the most common include Accounts Receivable, Accounts Payable, Inventory, and Fixed Assets. Control accounts can be used to track both current and long-term items. For example, Accounts Receivable accounts are used to track customer invoices that have not yet been paid. Inventory accounts are used to track the quantity and value of inventory on hand. And Fixed Asset accounts are used to track the acquisition cost, depreciation expense, and remaining life of major property and equipment items.
Risks of These Accounts
While these accounts are an essential tool for businesses, they also come with a certain amount of risk. Errors in control accounts often lead to discrepancies in financial statements and incorrect tax returns. They can also fraudulently misrepresent a company’s financial position. For these reasons, it is important for businesses to have strict protocols in place. Businesses should also perform regular audits to ensure accuracy and compliance with regulations.
Edgewater CPA Group Can Help Manage Business Finances
When it comes to managing your business finances, Edgewater CPA Group can help! Our team of licensed and knowledgeable professionals loves working with businesses throughout Carmel, IN, and we’d love to work with you! We offer a wide array of services, including bookkeeping, controller, and tax prep. We’ve got everything you need to manage your business and grow. So, give us a call today at (317) 207-9269.