About balance sheet management accounting

Written by sabah karimi
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About balance sheet management accounting
Use a spreadsheet package to compile your balance sheet. (Stockbyte/Stockbyte/Getty Images)

Optimising the structure and reporting of accounts using balance sheets is a task typically undertaken by financial managers and management accountants. Balance sheet management-accounting processes help companies fine-tune their reporting and financial data compilation processes, so the balance sheet produced at the end of the accounting period is as accurate as possible.

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Significance

The balance sheet is an important financial-analysis and reporting tool that outlines the assets, liabilities and equity of the company at the end of the accounting period. Accountants and financial analysts can use one of two generally accepted balance sheet formats to share this information with stakeholders, investors and financial managers of an organisation. An effective balance sheet management-accounting system makes this process efficient and ensures that all balance sheets produced follow a specific format and are as accurate as possible.

Function

Balance sheet management accounting involves using best practices and generally accepted accounting principles (GAAP) to produce an accurate reporting of financial status. The balance sheet is also known as a "statement of financial position," because it helps companies see the bigger picture of their finances by providing a snapshot of their assets, liabilities and equity accounts at the end of the accounting period. Optimising the balance sheet reporting system allows managers, financial analysts and members of the company's board to review essential financial information at a glance, so they can make appropriate decisions using the most current financial data.

Features

Balance sheet management accounting is an important element of strategic planning for many organisations, and demands clear and accurate reporting. The department responsible for overseeing balance sheet management-accounting processes may be involved in setting up reporting protocol for all departments; creating a system of checking for errors; and using various types of computer software and reporting tools to calculate the final figures.

Benefits

A well-developed balance sheet management-accounting system helps companies of all sizes obtain an accurate perspective and overview of assets, liabilities and equity accounts so that they can make better decisions for the next accounting period. An efficient reporting system also reduces the margin of error when creating end-of-year financial reports or preparing taxes, and can also provide prospective investors with clear and accurate financial data.

Considerations

Balance sheet management-accounting systems are optimised by streamlining all reporting processes and making sure that all procedures and protocol follow GAAP or organisational guidelines. Each component of the balance sheet needs to be checked for errors and reviewed several times by financial analysts and accountants to ensure that it is free of errors, and that all accounts are balanced. This type of assessment can help improve the balance sheet management-accounting and reporting process for companies of all sizes.

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