Corporate Accounting : Meaning,Topics,advantages and limitations

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Explanation of CORPORATE ACCOUNTING

This is a special branch of accounting which deals with the accounting of a specific or individual company. It includes preparation of final accounts, cash flow statements, for specific events like amalgamation, consolidated balance sheets, absorption etc. Corporate accounting mainly focuses on analyzing and interpreting the company’s financial results.

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Corporate accounting revolves around maintaining an organization’s financial records in order to ensure that the directed rules are compliance effectively and working procedures are held within the limits of the organization’s rules regulations and policies. Corporate accounting not only benefits the company but also enables the executives in making financial decisions. The Corporate Accountants dealing with all this work are also often referred to as Management Accountants.

It practices the double-entry book-keeping system in which every transaction will be recorded in two accounts which means that the debit account is the one from which money is leaving, and credit account is to which it is transferred. This branch of accounting requires preparing and consolidating an organization’s financial statements, and ledgers. Ledgers and financial reports are collected from various organizations’ divisions and further, corporate financial statements for company executives are prepared. It is ensured that each division of the organization is covered and they are contributing to company’s revenues equally.

With the motive of meeting financial goals, every year, efficient planning and well-versed working structure must be established. This gets possible with Corporate Accounting. Budgets are prepared to adequately allocate the funds and resources for various expenses in the departments of the company.

Apart from the financial works, Corporate Accounting also includes Auditing which specifies clearly whether organizational goals are met each year or not.

Corporate accounting is for the large organizations and partnerships, where the requirements and demands for filing accounts are less rigorous.

Thus, Corporate Accounting includes the elements of book-keeping, classification of transactions, analysis of reports in such a way that these reports can be further used for decision making.

Corporate Accounting clearly requires the knowledge of:

  • Accounting Principles and Conventions
  • Accounting Standards
  • Shares and Debentures
  • The issue of and Forfeiture of Shares
  • Issue of Debentures
  • Redemption of Preference Shares
  • Redemption of Debentures
  • Valuation of Goodwill
  • Company Amalgamations,

and various such other topics.

Further, the Corporate Accounts holds some advantages as well as some limitations.

Advantages:

  1. The shareholders of a corporation have a limited liability.
  2. A corporate entity can raise its amount by selling shares and issuing bonds.
  3. A corporate company holder can transfer his ownership.
  4. Since ownership of a corporation can be transferred, it has a perpetual life.
  5. Owners can also receive tax-free benefits.

Limitations:

  1. Generally, in such corporations, paying taxes gets double as the corporation itself pay tax depending on its type and then shareholders pay taxes on the dividends received by them.
  2. Due to excess tax filings, it requires a lot of paperwork.

Thus, it is evident from the given explanation above, that Corporate Accounting is indeed a special branch of Accounting.

Also, Check,

The Corporate Finance: Meaning, Definition and Principles

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