Accounting department definition
/What is an Accounting Department?
The accounting department is part of the corporate overhead group of an organization. It is responsible for billings, payroll, cost accounting, the production of financial statements, paying suppliers, and similar activities. The accounting staff may provide a number of additional value-added services, such as actual-versus-budget reporting, cost reduction suggestions, and other forms of financial analysis.
Structure of the Accounting Department
The accounting department is usually managed by a controller, who in turn reports to the chief financial officer. The controller’s direct reports are a tax accountant, general ledger accountant, payroll manager, cost accountant, and billing and collections manager. If the company is publicly held, then a reporting manager may also report to the controller.
In a smaller organization, a bookkeeper may be the only person in the accounting department. In this situation, an outside CPA may review the work of the bookkeeper from time to time, and make suggestions to management regarding how the bookkeeper’s work can be improved.
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The Functions of an Accounting Department
The key functions of an accounting department are noted below:
Financial recordkeeping. An accounting department maintains financial records pertaining to all financial transactions.
Budgeting. An accounting department prepares annual budgets, and monitors variances between actual and budgeted financial performance.
Payables and receivables. An accounting department manages payments to suppliers, while also billing and collecting from customers.
Payroll processing. An accounting department calculates employee compensation and deductions, and disburses pay to employees.
Tax compliance. An accounting department prepares and files a variety of tax returns, and may advise on strategies to minimize tax liabilities.
Financial reporting. An accounting department prepares financial statements and other periodic reports.
Cost management. An accounting department tracks and reports on operational costs, and identifies opportunities for cost savings.
Cash flow management. An accounting department monitors cash inflows and outflows, and ensures that there is sufficient cash on hand to meet the obligations of the organization.
Asset management. An accounting department tracks company assets, and supports capital expenditure planning.
Stakeholder communications. An accounting department communicates with investors, lenders, and creditors, and provides financial reports for shareholder meetings.
Systems management. An accounting department manages accounting systems, and a range of supporting accounting procedures and controls.
By performing these functions, the accounting department ensures the financial health and operational efficiency of an organization.