Wednesday, 12 October 2016
Thinking to become an accountant? You need to prepare yourself well for the task. An accountant has different roles and responsibilities, and unlike often thought, many of the responsibilities sexist outside the office desk as well. As an accountant, you need to be well versed with the present industry trends and have a strong grasp of the accounting principles, to know when you could apply a particular principle to a situation.
Being an Accountant in Singapore
Every organisation needs accountants, and with a rising Singaporean economy, the number of accountants is increasing too. Going beyond the fields of management and taxation, accountants are an essential part of any business firm, their work contributing significantly to ensure that the company does not run into losses.
Accountants play an important role in ensuring the domestic and overseas success of a company. It is for good reason then, that demand for accountants is at an all-time high in the country today.
What Roles Does An Accountant Play?
With the boom in the financial sector, there are a lot of opportunities available for accounts in the country today. Following are some of the career choices you can go for. Many of the job profiles require you to specialize in different aspects of accounting.
1. Financial Accounting
Financial accounting as a field arguably has the most number of graduates involved in the country today. You have the option to provide your services to commercial or non-commercial organisations. The job includes a large number of duties, but at the end of the day, your purpose is to ensure that the organisation you are working for does not fail to obey its legal duties and is financially stable.
2. Audit and Assurance
Another career option that you can pursue is of Auditing. As an Auditor, your job is to test a company’s accounts and decide if they genuinely represent the company’s dealings. Auditors in the country have to register with Accounting and Corporate Regulatory Authority. You need to ensure that the decisions you take and the way you keep the record book is legally compliant with the different regulations and laws of the countries, a reason you need to constantly update yourself with the recent developments.
As a Tax Accountant, you will be accountable for the accumulation of tax related information for government authorities. In the private sphere, your role may include giving advice to companies about the tax impact of their strategies.
4. Risk Management
One of the newer job profiles today in Singapore is that of Risk Managers. They play a pivotal role in the success of a company as they recognise potential risks to its profits, and devise plans to avoid or mitigate these risks.
5. Business owner
Many accountants develop an entrepreneurial instinct and become well versed with the financial workings of a business firm. Experience in the accounting field will provide you with the most important skills needed for running a successful business.
While you would have everyone from the company CEO to its employees being given credit for the organisation's success, none can forget the contribution of accountants.
Accountants ensure that the policies are legally compliant, and the auditing books are maintained properly. For the long-term success of a company, it is important that the accountants do their work properly.
General responsibilities of an Accountant
Though there are diverse job profiles in the Accountancy field, there are certain responsibilities to be performed in every sphere. Some of these responsibilities include the following.
1.Working in a company
As far as the responsibilities in a company are concerned, your job profile will vary according to your preference. You may have to prepare VAT returns, monthly and annual accounts and examining financial statements. As an integral part of the team, you will work to implement risk management policies and help the company maximise their profits. Your job could also include facilitating mergers and acquisitions.
2. Working in the audit Sector
Your responsibilities can include sampling transactions including copies of cheques from customers, purchase orders, and contracts to ascertain that the sales figure are correct. Contrary to the common misconception, you do not have to check each and every transaction, just the ones that are important. And although you need to keep a lookout for fraud, it is not the sole purpose of your job.
Having The Perfect CV
Have a resume that is precise but conveys all the relevant information. Your CV needs to convey your knowledge and years of accounting experience.
Remember, employers look out for assets. So, you need to have a resume that makes you an asset to their team. Make yourself seem useful actually to bag that job you always wanted. Your roles would be tough, so it is important to help your employer know that you would be up for the task. Highlighting previous experiences or telling about how you handled some real life projects successfully would be good brownie points.
Why is it a good idea to be an accountant in Singapore?
There are various reasons to go into the accounting field. With an increasing number of Universities providing quality education and producing alumni who are plying their trade all over the world, you are sure to benefit. Government authorities with stringent laws are emphasising more and more on holding firms accountable, leading to a large number of job opportunities. The booming private sector has allowed domestic firms as well as MNCs to scout for talent in universities.
How can you benefit?
You can be assured of continued success as an accountant. Even if you start in a low-paying position at a firm, the industry allows you to achieve unparalleled heights. With hard work and creativity, you can rise to important management positions in a firm. At the same time, stable and well-paying government jobs are an attractive proposition as well.
Working as an accountant can be initially difficult, as you would have to take care of all the rules and procedures. In short, you will need to have the following qualities to succeed in the field.
- Dedication to your work
- Perseverance to meet deadlines
- Meticulous attention to details, you just cannot have anything wrong.
- Sound knowledge of accounting principles
If you are looking for an accounting job in Singapore, it can surely be a rewarding one. While there are different accounting roles and responsibilities that you would have to juggle successfully, the rewards are high and often, satisfactory.
Tuesday, 27 September 2016
Is Auditing Services Expensive in Singapore? Do you also have the same question in your mind? A lot of people can have this question in their mind and they keep on wondering about auditing services. Well, if you also have the same question in your mind, then I would suggest you not to expect a straight forward answer for this. I am giving this suggestion to you because expensive is based on the prospective. For certain people the cost of the auditing services may not be very much expensive and other people can have just opposite opinion for same. Before you decide if acting services are expensive or not, you need to keep few things in your min.
Cost of living: In Singapore, cost of living is much higher compared to many other places. According to a recent report Singapore is named as the costliest city to live in the world. That is one thing that can explain that cost of most of the things would be higher here and auditing services is one of those things. Indeed, if you are a native in Singapore, and you do not need to pay for the rent, if you are not using any private transport option then chances are very high that you can live in this city without spending much money. However, auditing services will not keep those things in their mind and they will charge to you accordingly.
Lot of work: Although Singapore is a place where tax amount is very low, thanks goes to the best economy. Yet, auditors need to do a lot of work to put you out of tax room and other things unless you don’t have any extra expenses. So, if we say auditing services and its cost may vary depending on your specific requirement, then that would not be a wrong statement. Buying a car in Singapore is luxury and you may need to put a lot of tax for that. So, if you bought a car, then chances are high you would need to pay more for adopting services. And if you use only public transportation systems, then you may not need to give much tax for your income and it will be easier for the auditors do to your work.
Lack of auditors: In Singapore, auditing services need special and precise knowledge of the work. Auditors need to clear various exams that are neither easy nor man gable by all the people. That means you would have lack of auditors for the auditing services. This is a simple demand and supply rule. If demand is higher, then you would always have to pay more money for that and same goes for the auditors as well. I am not suggesting all the auditors can charge a lot of money to you, but if you compare the cost with other places, then it could be slightly higher than that. So, when you make our opinion about the cost of auditing services in Singapore, make sure you keep this thing as well in your mind to make your opinion smartly.
Services: If you want to take the auditing services for your individual use, then its cost would be different and if you want to take services for your business, then cost would be different for sure. Here, you also need to remember one thing that cost of the auditing services not only varies on the basis of type but volume also does matter. If you have low monthly volume in the transaction part, then you would have to spend less money for that and if you spend more money every month, then cost of auditing services will automatically increase. This is based on a simple rule. If auditor needs to do more work, then they will charge more money to you. That is not a rocket science and all should understand that easily.
Firm reputation: Choosing a top class firm gives you an assurance of the best auditing services, but it increases the cost of the services as well. I don’t need to explain this simple fact to you that a firm with higher reputation will certainly charge you more money compared to a firm that is new in the business. I am not suggesting a new or low firm will provide second grade services to you, nor I can say a firm with higher reputation can do anything extra for you. But they do charge for auditing services according to the reputation and their brand value. So, if you want to get the auditing without paying much money, then you can choose a new firm as well that offer better services to you but charge less money.
Extra services: In some situation, you not only demand for the auditing services, but you expect few other things as well from them. When people demand for extra then they need to pay extra for that. However, people do not consider that extra as a load on the auditor and they want to get it done for free. Nothing comes free and people should understand and embrace this fact. If they would take extra time from the auditor, then they will charge you more in the auditing services and they will give other services for free. So, if you have this kind of habit of asking things or services for free, then it will affect the cost as well for you.
So, if you want to decide more about the cost of the Auditing Services in Singapore, then make sure you keep all these things in your mind. If you can keep these things in your mind and if you can take your decision accordingly, then I am sure you would be able to find a straight forward answer for this question. Also, if you would want to take the help of auditing services for any of your need, then you may get that result as well without any issue and you would be able to have better experience with them in the simplest possible manner.
Saturday, 13 August 2016
There is no denying the fact that Singapore is one of the most business friendly countries in the world. It usually affords the best of facilities for new and budding entrepreneurs. It is therefore not surprising when we find that some big startup firms are located here. All business are governed by well laid down rules, regulations, processes and procedures. Therefore if you are one of those on the lookout for starting your business in right earnest, Singapore would be a great place. When we talk about businesses we usually refer to sole proprietorships, partnerships, private limited companies and public limited companies. In this article we will try and find out what sole proprietorship is all about as per the laws of Singapore. We will also try and draw a comparison with private limited companies as they are defined and described under the Singapore business laws. This will help you to understand the applicable differences and therefore will enable you to have clarity when planning to open a business in Singapore as a foreigner.
How Is Sole Proprietorship Defined In Singapore
It would be pertinent to mention here that sole proprietorship in Singapore is not a legal or incorporated identity. So as per the law and in the eyes of the general public the person who starts the sole proprietorship and the company which he is running will be one and same both the from the legal standpoint and the operational standpoint. Hence if you start a sole proprietorship you have total control of the entire business which you run, but at the same time you alone will be responsible for all the debts, obligations and liabilities. In other words, the proprietor will have unlimited liabilities. He or she could be sued by creditors, government agencies and others for wrongdoings done by the company which he or she owns and runs. This is because there is no difference between the company and the individual running the show. Therefore it a sole proprietorship has its own advantages, benefits and shortcomings. It is basically suitable for small startups and home based businesses, where the capital is low and the turnover is also within manageable limits. In fact some of the best known corporate houses in Singapore have started as sole proprietorships and then moved on to become companies.
What Is A Private Limited Company All About
On the other hand when we talk about a private limited company or a LLC (limited liability company) as it is also known as, there are quite a few differences when compared to sole proprietorship organizations. A company can be considered as a LLC when it has two members and where the total number of shareholders do not exceed fifty. Further when we talk about LLC 100% foreign ownership is also allowed. Further the biggest difference when compared to sole proprietorship is the liability that is defined.
Unlike sole proprietorships the liability of the shareholders or owners is limited to the amount that shareholders have committed to. The minimum paid up capital for a LLC can be as little as $1 and the concept of authorized capital is no longer available. However, it must have a memorandum and articles of association and it must be registered with the local registrar of companies.
Which Is Better
The common question which comes to the mind is to whether go in for sole proprietorship or LLCs. This would depend on individual needs, objectives and requirements. However, when there is a need for expansion and when liabilities are to be taken into account, there is no denying the fact that private limited companies are always a better option. As a shareholder, you will not have the Damocles Sword hanging on your head as is the case with a sole proprietor. You are different as a shareholder and the company is a separate legal existence. Hence you will not be liable for the acts taken by the company of which you are a share holder.
Tax Benefits & Other Points Of View
Though from the outside it might look that sole proprietorship offers better tax facilities for businessmen, if you go a bit deep into it there is no doubt that the tax benefits are much better and attractive for private and public limited companies. It would be pertinent to mention here that Sole proprietorships are not taxed as far as their business is concerned. However, the personal income of the owner and the profits generated by his or her company is considered as income and therefore liable for taxation at the individual taxation rates. On the other if it is a private LLC the company is taxed at the corporate rates applicable. Further they also have quite a few tax exemptions available for them. There are tax holidays for the first three years of operation. The tax percentage at the lower level is 3% and at the highest slab it is around 17%. This would depend on the profit generated by these private LLC companies. Singapore is a country which follows a single tier tax system. In other words if the company income has been taxed, the dividend that is distributed to the shareholders will not be taxed again.
Hence when all the above factors are taken into account there are reasons to believe that going in for private LLC would always be a better option. But as mentioned earlier, it would again depend on the overall long term, short term and medium term objectives of the company and its promoters. However, if there is a need to expand and grow from one level of strength to another it might always be better to go in for a private LLC company because of the various benefits mentioned above. But if one wishes to keep the company small it would be better to opt for a sole proprietorship. The control which the owner of the company can exercise overall sole proprietorships is also something which makes them suitable and perhaps even more flexible and easy to manage. But one thing is clear. Whether it is proprietorship or private limited company, Singapore offers the best of facilities to run their business smoothly.
Monday, 11 July 2016
Financial statements are the foundation of a company’s or business’ credibility. A company that has any desire to become successful needs to keep meticulous records of its financial activities be they in spending, profits, losses or even just the sales made in a day. This helps a company in the long run to account for its expenditure and how profits are shared. After a given period of time, a company should ideally compile all these records in a report that will make communication of how it has spent its money easy to people who are not directly involved in the running of the company.
These people include shareholders in the company as well as banks in case a company wishes to borrow some money from a bank. Other people who might be interested in knowing how a company utilizes its money are distributors and suppliers that the company wishes to pay for their services after a while, say after a month. These people need to know how accountable a company is and how well they can rely on it to pay its dues.
As a show of its credibility, a company then takes upon itself the responsibility of compiling its financial records and presenting them to the relevant people or entities. There are basically two types of financial statements: audited and unaudited financial statements.
Audited financial statements
In its ordinary sense, an audit refers to a verification process of any kind by external and independent party. In the case of financial statements, this definition of an audit holds. An audited financial statement is a statement that has undergone the scrutiny of independent auditors who have examined a company’s financial records. They have had a hard look at its accounting balances, its record of cash flow and how well it complies to set regulations.
An audited financial statement therefore has the stamp of approval from the auditor. In order for a financial statement to qualify as an audited one, it must be accompanied by the auditor’s report. This report should attest to the fairness of presentation of financial statements. Companies undergo financial audits for a number of reasons.
One reason why companies undergo financial auditing is because it is a mark of credibility on the part of the company. For a company to involve an external figure in order to ascertain that it runs its affairs well, it needs to be run by very accountable people. This is because the auditor can delve as much as they want into the company’s records of business transactions, and in case there are any fishy deals, there is a very high likelihood that they will be unearthed. Better still, a company that undergoes auditing and there are no negative remarks in the auditor’s reports is very likely to win a spot in the hearts of investors and lenders.
The other reason why companies or business ventures undergo auditing is because for large companies, it is a requirement of the law. The law has put such measures in order to restrain companies and business entities from carrying out fraudulent transactions. A company that anticipates an audit at the end of each year is certainly more likely to keep its records clean and keep a distance between itself and fishy transactions.
Businesses and companies also undergo auditing before they can borrow money from banks as a requirement of some banks and even other lenders. It is possible for a company to come up with its own financial statements, but when these statements are unaudited, lenders lose some faith in the company’s credibility. A company with an audited financial statement is certainly more trustworthy than one with an unaudited one, and lenders are willing to loan money where they are sure of getting it back.
Unaudited financial statements
Another kind of financial statements that a company or business entity can present to people who are interested in seeing how the company runs its financial affairs is an unaudited financial statement. This is basically a financial report that has not been scrutinized by external auditors in order to verify its authenticity. Although it does not bear as much credibility as an audited statement, it does serve certain purposes. For one thing, it is rather hectic to have every financial statement a company compiles audited. Companies require financial statements every now and then for a variety of reasons, and having all of those statements scrutinized and verified can be time consuming as well as too much of a bother.
One situation that warrants the use of unaudited financial statements is when a company or business entity needs to borrow money from a bank. Not all banks require that a company produces an audited financial statement, although all banks will ask for a company’s financial statement. Depending on the amount of money a company intends to borrow from a bank and the bank requirements for a loan, a company can apply for a loan using an unaudited financial statement.
Also, when a company is to be sold to new people or co-joined with another, an unaudited financial statement may be all that is required in order to gauge a company’s financial abilities as a practice of due diligence. Another reason why a company may compile and present an unaudited financial statement is when contractors or suppliers need it as a measure of a company’s financial capabilities. These suppliers may request for these statements every now and then, therefore there is little need for them to be audited.
Audited or unaudited financial statements
Both of these statements have their pros and cons. Audited financial statements carry with them the seal of a company’s credibility and trustworthiness. On the other hand, carrying out a financial audit on a company is not only time consuming, it is also very expensive. A financial audit is in fact one of the most expensive examination of a company’s financial statements. In some instances though, a company has no choice but to undergo a financial audit, especially when it is a requirement of the law.
On the other hand, an unaudited financial statement is not really an emblem of credibility, but it beats logic to have every financial statement that a company makes audited. This is very time consuming and expensive, so when you have an option of producing unaudited financial statements, feel free to do so. However, do not solely rely on unaudited financial statements or your company will have a bad reputation. It is important to have audited financial statements at least annually.
Wednesday, 8 June 2016
GST stands for Good and Services Tax which is a broad term used to describe consumption tax which is levied on imported goods. Singapore Customs is responsible for collecting GST from various businesses. All goods and services sold in Singapore have GST. Its counterpart in the United States is Value Added Tax more popularly known as VAT. There are certain people, institutions and establishments which are exempted from getting charged with GST. It is mostly applicable to financial services, local and imported supply of precious metals which are invested, as well as the lease and sale of residential properties. Goods and services which are exported for international sale and purposes are zero rated or are not charged.
• TAXABLE SUPPLIES OF GOODS
The Standard Rated Supplies which are charged with 7% GST include all local sales in Singapore. Anything that is sold in malls, supermarkets, stalls, retail shops, department stores, novelty stores, antique shops, toy shops, sports shops and others are included. Zero Rated supplies are charged with 0% or no charged at all. This includes all exported goods which come from Singapore and are distributed to other countries. For example, a sale of a camera to a customer based from the United States and shipped to a US address will not be taxed.
• TAXABLE SUPPLIES OF SERVICES
Services which fall under the Standard GST rate of 7% include all local services based in Singapore. Examples of this are beauty salons, spas, restaurants, tailor shops, amusement parks, bars, karaoke establishments, car wash and similar businesses. As long as the service is located in Singapore, it will be charged with 7% GST. Zero Rated supplies are types of services which have been classified as an international service. An example of this is purchasing plane tickets originating from Singapore to visit France or any other foreign country.
• EXEMPT SUPPLIES OF GOODS AND SERVICES
In terms of Goods, all unfurnished residential properties which are either for sale or for rent are exempted from GST. The local supply and importation of precious metals which are to be invested are also exempted. For Services, only financial based services will not be charged with the GST.
• OUT OF SCOPE SUPPLIES
Out of Scope Supplies means that these goods and services are not charged with GST. It is only applicable for goods which have been sold and delivered from a different country and will be delivered to another destination. All private transactions are also exempted from being charged.
• WHEN TO REGISTER FOR GST FOR YOUR COMPANY
If you're a business owner, you need to follow specific requirements to apply for GST for the first time. It is important to be aware of what you need to do and when you should register. It will help you go through the process much faster and more easily. Before we discuss the requirements, let us define the meaning of taxable turnover. It refers to the grand total of all taxable goods and supplies and its value. If you're not sure whether or not you're liable for GST, carefully assess the sale of your financial services and capital assets which are considered to be international services. Make sure you have excluded this amount from your total computation so that you can clearly compute for your taxable turnover. You should register for GST once you have experienced the following situations:
• FIRST CONDITION FOR GST
If you have earned more than $1 million over the past year or the past twelve months, you should file for a GST. You have to be aware of your exact taxable turnover at the end of the month of March, June, September or December which are also known as the past four quarters. Once you have reached more than $1 million, you have to register for GST.
• SECOND CONDITION FOR GST
If you have the intention of creating, selling or making any taxable goods, supplies and merchandise, you will need to register for GST. This should be done because you will be expecting a taxable turnover of more than $1 million for your business. This is also taking into consideration the exact amount of your taxable turnover in the past year or past twelve months. You can reasonably assume that it will be more that $1 million because of business agreements and signing various sales contracts.
• THINGS TO CONSIDER
Although these are the main requirements in registering for GST, some businesses choose to voluntarily register for one. Even if your taxable turnover does not exceed the cap of $1 million, you can try registering. However, it will be put under careful consideration so you will not be guaranteed a successful registration. It is important to keep in mind that even if your financial year does not end in the past four quarters which includes March, June, September or December, GST will still be applicable. You should begin charging GST for your goods and services beginning from the day of your registration.
• HOW TO CLAIM GST CREDITS
The GST you've accumulated from business imports and business purchases can be claimed and used as credits. It will begin immediately on the day you've registered. A person who is registered for GST can claim the total amount of GST accumulated from his goods. The only thing to consider is if the purchases were made by his business in order to make taxable supplies. These expenses or purchases should be supported with a proper and legitimate tax invoice. It should not fall under any restrictions or specifically disallowed claims written under the GST Act.
• RESPONSIBILITIES OF A GST REGISTERED PERSON
The main responsibilities of a GST registered person includes the accurate accounting of all GST taxable supplies. It also includes the proper use of GST inclusive prices which have been provided for goods and services. The price tags, advertisements, brochures, price lists and websites should always coincide with one another. It is important to be compliant with all the regulations. A GST registered person also has the responsibility to maintain all business records and accounts for at least the past 5 years. It's essential to exclude GST claims on any items which are exempt from the mandated list to avoid any problems.
Wednesday, 18 May 2016
What You Should Know About Financial Reports
For stock investors, it is an essential skill to know how to read and work with the entries on a company’s financial report. The analysis and meaningful interpretation of balance sheets, cash flow statements and income statements to discern the investment qualities of a particular company is the basis for making smart investment choices.
However, financial reports are very diverse and would require you to get familiarized with the general financial report characteristics first before you can start focusing on the individual corporate financials. Read through the article because we will show you everything that financial reports have to offer as well as on how to use them for your advantage!
* Financial statements are scorecards
There are millions and millions of individual investors all over the world. A huge portion of them have opted to invest on mutual funds as their main investing activity. There are also those that choose to invest directly on stocks. A prudent investing practice is to seek out only the quality companies that have strong balance sheets, positive cash flows and solid earning. These companies are the best ones to put your money into. You will know the financial status of a particular company through their financial reports.
* The specific type of financial report you should use
Balance sheets, cash flow statement and the income statement are the financial reports you need to use or look out for if you are going to conduct an investment analysis. The statements of retained earnings and shareholders’ equity which companies rarely present, contain nice-to-know data but they are not informative and critical. Financial analysts stay away from them since they don’t have much use.
A word of advice: a lot of people from the general investing public tend to focus on the balance sheet and the income statement. Although this will do, you will have a tendency to relegate the cash flow considerations on a secondary status. Financial analysts would tell you that this is a mistake you should avoid doing. For now since this is a beginner’s guide on financial reports, just remember that the cash flow statement holds myriads of critical information and important analytical data and that you need to look into it along with the other two reports.
* Understanding the numbers
The numbers in the financial reports of a company reflect events of the real world. The financial indicators or ratios and the numbers are all derived from them because investment analysis will become easier to grasp if the analyst will imagine the underlying realities to the provided quantitative information. Case in point: before you begin crunching the numbers, you first need to have an understanding as to what your company does as well as its products and services and the industry it is operating in.
* Financial reports are diverse
You cannot expect that final reports can be fitted into one single mold. A lot of books and articles on financial report analysis take on an approach that analysts call as one-size-fits-all. For a less experience investor, he will surely get lost as soon as he encounters a different presentation of accounts than what he is normally accustomed to. What you should do is to remember that the presentation of accounts reflects the diversity of the activities of the business. The more diverse the activities of the business are, the more diverse the financial reports would be. This is apparent in a company’s balance sheet but the cash flow statement and the income statement are less affected to this phenomenon.
* Understanding financial jargon is certainly a challenge
There is a lack of standardization for financial reporting terminology and this complicates a beginner’s understanding to the long list of financial report account entries. It can even be confusing to experienced investors. One can only hope that this circumstance will change in the near future. For now, a financial dictionary will suffice.
* Accounting is not a science, but an art.
As it will be portrayed in the financial reports, management judgments and estimates influence the presentation of a certain company’s financial position. In an ideal world, the management is scrupulously candid and honest while outside auditors are the ones that are uncompromising, strict and demanding. However, whatever the case is, there is definitely an imprecision in the whole accounting process. This means that you as an investor should take a skeptical and inquiring approach toward the analysis of the financial reports.
* The two most important accounting conventions
GAAP or the generally accepted accounting principles are used as a guideline in the preparation of financial reports. For investors, having the basic understanding to even two of the conventions like the accrual accounting and historical cost would have a great impact on your future investing decisions.
* Financial indicators and ratios
For investment analysis, absolute numbers that are in financial reports only possess of little value which should in fact transform the numbers into a basis in judging a company’s financial condition and performance. The resulting indicators and ratios need to be of your knowledge for an extended period of time so you will have the chance to notice trends. This will also give time for the trends to reflect on the financial report.
Again, be cautious of the one-size-fits-all mentality. All evaluative financial metrics differ greatly especially between industries, in a company’s stage of development and size.
* Notes written in the financial reports
It is hard for financial report numbers to give the disclosure the regulatory authorities require. Most professional analysts would say that providing thorough notes in the financial reports would help substantially on the proper evaluation of a company’s financial performance and status. Auditors have noted that the accompanying notes on the financial report are an integral part to the entire process. As a potential investor, you must take the notes and comments seriously.
The financial report perspectives that has been explained in this article is compiled to give you an overview of the big picture. As an amateur investor, you need to take all the things mentioned above into consideration and have them all put to heart so you can be better prepared in coping the complex learning process that you still need to go through. Take time in learning all of the analytical details that will discern the investment qualities of a company’s financial reports and you will be well on your way to succeeding in this endeavor.
Thursday, 7 April 2016
PE ratio or Price-Earning ratio can be used to assess the value of a company by measuring relative proportion of the current price of it is share with its earning per-share during last year. This tool can help the investors in Singapore to make right decision while buying the stocks of certain company. The potential investor can know the amount to be paid to earn $1 with the help of PE ratio. If the ratio of price and earning is low than it is considered as favourable to investor as he has to pay less money for earning each dollar. On the other hand the future growth of a company with higher P/E proportion is considered better than the company with lower ratio. So you will have to calculate this ratio to compare the worth of the shares of different companies. The method of calculating and using this price-earning ratio is briefly described in this write-up to help you in this regard.
Calculating the PE Ratio
While calculating PE ratio of a company’s shares in Singapore you should use a simple formula of dividing the market value of its each share with the earning per share during last twelve months. This formula can be written as PE ratio = P/EPS where P represents the market price of each share and EPS the earning for each share.
So to calculate the PE ratio of any stock you will have to know the value of both of these variables-P and EPS.
Finding stock price or P: The market price or P of each share of a company can be determined easily by the price you will have to pay in the stock market to buy its single share. For instance if you have to pay $110 in the stock market to buy one share of a publicly traded company then it will be termed as its P or market price. It can be known online just by entering the full name of the company or the symbol of the stock and clicking on “Stock” button.
The price-earning ratio of company keeps on fluctuating as the price of its stocks fluctuates constantly. So while choosing the stock price to calculate its ratio you can take its current price instead of searching for its high, low or average price. But while comparing the PE ratio of two companies you should choose the prices of their stocks at a particular time. It can either be the current prices of the stocks of both the companies at a moment or at the time of opening of the stock exchange.
Finding EPS or earning per share: While calculating or finding the earnings per share of the stocks of a company financial analysts generally use the net income of the company during the last four quarters or twelve months and divide it with the number of its shares in the market. Sometimes they also find a projected or forward ratio by using expected earnings of the company during the next four quarters. You can also find EPS of a company from its stock report freely available on its website. The EPS value of a stock can vary as different people use different methods to calculate it.
Calculation of the price/earnings ratio: It becomes easy to calculate PE ratio of a company once you have calculated it stock price and EPS. You can divide the stock price of the company’s share with its EPS to get its price-earning ratio.
Now after calculating PE ration you should know how to analyze it and use while buying the stocks of a company.
Analysis of PE ratios
For comparing the PE ratio of companies of same industries: Individually price-earning ratio of a company is merely a useless number as it does not tell anything about the company unless it is used for comparing it with the ratio of other companies of the same genre. You can buy the stocks of a company with lower ratio of price-earning at cheaper rate as their stock price remains cheap regardless of their higher earnings. But you cannot make right decision to buy the stocks of a company only on the basis of this analysis. Sometimes the stock prices of a company with higher PE ratio remains lower than that the company with low price-earning ratio. In that case people will choose to buy the stocks with lower ratio even if their market price is higher than others.
One must understand while analysis the price-earning ratio of two companies that their effort can be useless if there is no similarity in them as their growth rate and valuation can vary widely. So you should compare the PE ratio of the companies of same sector and size. Moreover future expectations of the investors about the value of a company can also affect its PE ratio even if it is related to the past performance of the company’s stocks. Actually the price of a stock only indicates the views of the investors about its performance in future. The higher price-earning ratio of a company’s stock indicates that the investors expect to higher earnings from that stock in future. On the contrary, the company with low PE can be considered as undervalued which can do better in future than its performance in the past. Thus PE cannot be taken as only factor that can help in deciding to buy the shares of a company or not.
While analyzing the PE ratio of a company you should also keep in mind that it can be lowered artificially or due to debts. The risk on the company’s profile increases if it takes lots of loans from the market. In this way the price-earning ratio of the two companies of similar size and same sector can vary if the amounts of their loans differ considerably. So while using PE to assess the value of a company you should check the vitals of the company thoroughly.
Thus you will have to analyst the PE ratio of a company in Singapore carefully, after calculating it, while buying its stocks.
Tuesday, 8 March 2016
Fraud usually occurs when a person attains something valuable, i.e. property or a lot of money from a victim by deliberately making a misrepresentation of a subject of fact. This trait is often witnessed in the buying and selling of properties especially in real estates and stocks. It has also been used on making false reports about taxes and health care claims meant to drain money from the federal government or state.
However, there are some effective audit procedures that can be put in place to detect fraud. These tests allow the auditor to put together enough appropriate audit evidence which can prove that the financial statements have not been tampered with. Here are some of the audit procedures that can be used to detect fraud.
· Engage in Fraud Brainstorming Sessions
The first procedure that can be used to detect fraud is by holding the fraud brainstorming session This is a key factor at the beginning of an audit session and is listed under generally accepted auditing standards.
This session aims at providing enough time for the audit team to look into factors that can lead a company into committing fraud. It is also used to put in place a tone of professional skepticism in the audit. In addition, the auditor also attends the meeting to give enough information about other similar frauds committed by other related companies so as to help discover the client’s risk factors.
· Make Increased Inquiries
This is another key procedure as it is considered a highly effective tool in fraud investigations as well. Expanded inquiries are used to get information from people who are not willing to freely give details about suspected fraud.
These inquiries also require auditors to question individuals out of the company’s financial or account report errors and other employees too. The main purpose for this procedure can be achieved based on the auditor’s professional judgment and can also be directed to all the workers whom the auditor contacts.
· Journal Entry Analysis
This audit procedure is usually carried out because for one to commit material financial statement fraud, they will be required to alter the company’s financial records. The auditor usually analyzes the company’s journal entries so that he can detect any signs of manipulation. In order for an auditor to successfully perform this test, he is required to attain a full understanding of the company’s operation and procedures.
The analysis basically requires the auditor to distinctively select entries that are made by upper management, posted late in the accounting period or entries that are large, and once these selections are made, the auditor asks for documentation that proves the validity of each entry.
· Identify Risks Related To Revenue Recognition
One of the major issues that have been at the core of several instances of fraud and is still the main reason why financial statements have to be restarted is revenue recognition. Identifying risks related to revenue recognition is one way of addressing this problem.
During this procedure, auditors are required to identify any risk of material misstatement caused by fraud and relates to revenue recognition. At the beginning of this procedure, analytical processes will be applied so as to help take note of unusual or unexpected relationships that are linked to revenue recognition or related accounts.
· Accounting Approximation
This is yet another audit procedure that can be used to detect fraud because many fraud cases have previously been identified in accounting estimates. This is because accounting approximation is particular and the management has the ability to influence accounting estimates so as to alter the financial statements.
During this process, an auditor is expected to look for any signs of frauds in accounting estimates by using two particular ways, which are as follows; a complete lock back procedure to identify the methods used to complete accounting approximation and the directionality of the estimates as a whole in a year.
If the result shows that all the estimates of the previous year were low but those of the current year are shockingly high, then the auditor will be concerned why the company is rapidly shifting income from one period to another.
· Discover Odd Transactions
Recent reviews on auditing principles have acknowledged the fact that discovering odd transactions is a key audit procedure of detecting fraud. In this procedure, auditors closely monitor the important transactions that have been carried out illegally such as; out of the company’s normal business operations.
It is during this process that companies are required to give full information of the purpose and business validation for their transaction. Once the auditor gets this information from the management, the engagement team is expected to confirm it by providing extra details offered during the audit.
· Auditor’s Response
The final step is to provide an ideal auditor’s response to each and every fraud risk identified, which include general guidance and examples on how to do them. An auditor’s response is usually influenced by the type and implication of the risks identified together with an evaluation of the company’s program and control that might have affected how the audit was conducted.
This includes factors such as assigning extra persons with unique skills, training or the scale of the auditing procedures for particular assertions. An auditor’s response will also include performance of particular procedures so as to deal with the risk of management overrule of controls. Note that management is quite a unique position where fraud can be carried out because it can overrule established controls that are operating well.
Generally, audits were not created to find out every instance of fraud but auditors usually have the responsibility of detecting any financial misstatement caused by either an error or any form of fraud in a company’s financial statements.
The above mentioned audit procedures are key in helping auditors detect fraud in various companies. An auditor should note that accepted audit principles usually approve particular audit procedures to detect fraud that must be carried out during every audit .It is paramount for you to get acquainted with these audit procedures so that you can improve align resources for your company’s audit.
Monday, 29 February 2016
Whether you own a multinational company or a small business, your payroll service costs should be managed and budgeted for in the same way as any other cost in the business. This is especially true if you have a small business where costs represent a significantly higher proportion of income than larger businesses. Although you may be having very few employees, the system you use to manage your payroll does not cost you significantly less than that for a company that has many employees. This is why if you believe that you are spending a lot of time and money managing your employees’ payroll then it is high time you outsourced.
In every day’s running of a business, outsourcing has become very important. In fact, the rise of affordable outsourcing solutions has enabled many businesses to diversify into doing other things that they were not able to do before. Although some businesses are yet to embrace this trend because of the cons, many have decided that it is the way to go. The key to succeeding in this is looking for the best partner that can handle your outsourced services without any problem. More so, a true outsourcing payroll partner will allow you to maintain a firm base. But what are some of the pros and cons of outsourcing payroll services?
· Saves you a lot of time; according to a survey that was done in the recent past, small business owners claimed that managing payrolls is one of the greatest burdens that they have to bear. As a matter of fact, each pay period requires a considerable amount of time and effort. It is, therefore, ideal to outsource so that you can free up time that can then be spent in other areas of the business.
· Improved security; when you outsource payroll services, you offer a secure system for company’s data and sensitive employees. This is because these companies employ multiple server locations, redundant backup up systems and the latest technology to protect your data.
· Saves you costs; typically, during payday period, you must prepare payroll taxes, calculate wages create reports among others. By outsourcing payroll services, you can spend time that could otherwise be used to do such things on profit generating activities.
· It calculates tax accurately; if you are a small business owner you understand that calculating the deductions involved with the employee payroll can really be hectic this is why having a payroll company that is equipped to calculate correctly and accurately is important. More so, the company will ensure that the taxes are paid on time so that your business is not penalized in any way. Remember, the amount levied on nonpayment of tax on time can cost more than what you could have paid had you done this on time.
· Provides document management services; outsourcing your payroll services will also provide you with document management services that can track and manage the flow of information that concerns payroll services. Apart from these, data checks, employee communications, compensation services, regulation compliance among other services can also be provided.
· Helps in regulatory compliance; it can be really difficult to keep abreast with payroll tax laws and penalties because of the errors that can occur. Since payroll service providers know everything to do with payroll, they will help you stay compliant with payroll related regulations and laws.
· Easier for new staff; a user-friendly payroll service will be much simpler and easier to use especially for new staff members. Since many companies change employees every now and again, having an easy to use payroll system will definitely make the work easy especially for new staff members.
· Difficulty in getting employee data; depending on the company that you have outsourced you may encounter a lot of difficulties in accessing employees’ payroll figures and other data since this information is often kept in another company’s server.
· The wrong company can produce errors; if you choose a payroll company that has never dealt with some aspects of your company’s data before, you can end up with a lot of errors in the payroll unknowingly and correcting these mistakes can be very difficult. A company that does not have a system where businesses can enter their employees’ data directly can also introduce a lot of human error while trying to do this manually.
· You may pay for services that you do not need; by outsourcing payroll services, many companies have ended up paying for services that they do not need. This ultimately increases the costs of outsourcing payroll services and it is true that the additional services offered do not benefit the company. This is why before choosing these services you should carefully outline what your business is looking for.
· If anything wrong happens you become ultimately responsible; if taxes are not remitted on time and accurately, your business and not the payroll company becomes responsible. This might be the case especially if the payroll company has an unscrupulous employee who has the ability to embezzle the company’s funds.
· Risk of the company going out of business; in most instances, payroll companies especially the ones that are new in business are likely to go out of business. If this happens you are likely to lose access to your payroll data and in worst situations, your money. It is, therefore, important to ensure that you look for a stable company before doing any business with it.
Outsourcing payroll services can save you time, money, as well as your sanity. However, before settling on any one company, you should ensure that you get a few quotes that you can check for reviews before eventually choosing the company of your choice. By doing this, you will know if any company has given poor service before. Irrespective of the number of workers that you have, outsourcing this important service will save you time and money not to mention a great deal of frustration. More so, by paying your employees on time, they will more than happy to work for you. In addition to the obvious, there are many advantages to outsourcing this service.
Sunday, 10 January 2016
Whether a business owner or manager decides to tackle the accounting and bookkeeping tasks themselves or hire an outside firm for the job, having a good grasp of both the process and results of the function will go a long way towards helping you understand your business and how it operates. Even better yet, with a good understanding of accounting, you will be in a good position to better direct business activities as well as to respond optimally when corrective action is needed. Many business owners and managers see the accounting and bookkeeping process to be a daunting task. In reality, however, it is relatively simple. In its most basic form, accounting and bookkeeping have two basic goals:
* the collection and organization of information related to the financial transactions of a business.
* the recording and reporting of income and expenses with the objective of understanding them and making a profit.
Contrary to what many people believe, the IRS requires no particular method of keeping records for taxation purposes. The only requirement is that the records that are kept accurately reflect the income and expenditures of a business. It is also important to note that there be some method that accurately reports the status of individual accounts doing business with a firm.
Largely depending on the size of a business and the quantity of financial transactions that a business engages in, it should be determined whether it will maintain its accounting records with a manual system or rely on an accounting program. Regardless of the method used, there are three steps to keeping the accounting records of a business.
The Three Steps of the Accounting Process
1, Maintain records of all financial transactions of a business.
This includes receipts and other acceptable records of expenditures by the business, Source documents of financial transactions should show amounts of the transactions, date of transaction, and other relevant information. It is from these transactions that the person responsible for creation of reports draw their data.
It is important to note that nowhere does the law require that a particular system of accounting be used for a business. It can be as sophisticated as a cash register hooked up to a massive computer network or as simple as paper stubs in a cigar box. What is important is that the records are maintained accurately. For example, if a business is very small, a bare-bones approach might be very fitting. On the other hand, as a business grows, it might be better suited to have an automated system.
2. Keep summaries of all income and expenditures on a periodic basis, whether daily, weekly, or monthly.
From the basic financial source documents the summaries are compiled. These summaries are called ledgers. Ledgers show the history of financial transactions for a business, including revenues, expenditures, and anything else related to business operations. These transactions are recorded according to category and date.
The posting of these transactions to the ledgers should be done on a periodic basis. This might be daily, weekly, or monthly, depending largely on the amounts of sales and purchases, as well as how detailed you might want your records to be. Generally speaking, the more often your financial transactions take place, the more often you will want to post to your ledgers. In the case of a retail store, for example, there might be hundreds of transactions in a given day, which would call for daily posting. It's in situations like these that an automated system is called for.
If, on the other hand, a business is smaller and the total number of transactions are fewer, a weekly posting, or even one done monthly might be adequate. Fortunately, there are some accounting software packages available on the market today which are not only easy to tailor to individual businesses, but they are also very affordable for even the smallest business. Most of these programs are very intuitive, which makes them easy to use by owners and managers that might not have any familiarity with accounting processes.
3. Create the financial statements of the business to get a picture of profits, losses, and other events to evaluate corrective actions and end results.
The ultimate goal of creating any financial records is the creation of financial statements, in particular the income statement, balance sheet, and statement of owners equity. It is these statements that give owners and managers the final word of how a business is doing and where corrective action can be taken. Financial statements bring together all of the information that is gathered in the ledgers.
A good way to think of your financial statements is to provide a place where all of the most relevant information about a business is analyzed. For example, to look at the income ledger might provide an owner with a healthy figure. In and of itself, that's great news. Unfortunately, when you bring both the income figure to the income statement, which also gives the figures for expenditures, a more realistic picture is given. This analysis might show that although you have excellent sales figures, a business might also have expenditures that cancel out all or most of the income, making a business much less profitable, or even operating at a loss.
Despite having the totals provided by the financial statements, attention should still be given to the ledgers, which provide information that is not reflected onto the statements. This includes, among other things, an analysis of how long it takes for credit customers to pay you, which can be a detriment to how efficient you operate your business.
Any business that intends to operate at a profit should have a system of accounting that accurately reflects how that business is being run. By keeping these records up to date, owners and managers can get feedback on cash flow, profit and loss forecast, and other information that will be relevant to how the business is operating and whether changes need to be made, and in a manner that is timely and relevant.