About financial accounting

Accounting uses information related to the financial position (transactions) of a company. An accountant collects, processes, and stores this information. Where necessary, the relevant information is provided to other persons.

The main users of this information are government institutions. Therefore, many business owners consider accounting to be an unnecessary expense. However, company management can use accounting information to monitor the company's financial position, including its profitability, assets, receivables, and liabilities.

Who Is required to keep accounting records?

Accounting records must be maintained by all persons carrying out economic activities, as well as by certain other persons (for example, associations and foundations). This follows from Section 3 of the Accounting Law.

What information must be processed?

Basically, this is information about the company's business transactions. However, a company may carry out certain transactions that are not related to its business activities. Such information must also be processed.

A company owns various assets (fixed assets, goods, cash, etc.), the composition and amount of which may change. Employees and other persons use the company's assets and perform various activities related to the company. The accountant should receive all of the above information that relates to the company. The quality of accounting also partly depends on how complete the information the accountant receives is and how timely the information is provided.

What should be considered when organising accounting records?

The organisation of accounting records depends on the "size" of the company (the number of transactions, employees, and fixed assets), as well as on the requirements of the company's management.

A company that carries out a large number of transactions will usually need an in-house accountant who works at the company's premises. An outsourced accountant can be engaged, where necessary, to perform specific tasks (for example, calculating payroll).

If the company is small, with a small number of transactions, and the management has knowledge of accounting, then certain accounting activities can be performed by the company manager. Even in this case, an outsourced accountant can be engaged to perform specific tasks (for example, checking and consolidating accounting data, and preparing reports and tax returns).

If the company's management does not need to communicate with an accountant on a daily basis and the company manager has decided to use outsourced accounting services, the company manager enters into an appropriate written agreement with the outsourced accountant. The agreement specifies the accounting procedures, as well as the rights, obligations, and responsibilities of the parties.

Note: A licence is required to provide outsourced accounting services in Latvia.

Information Related to Accounting

Information that may be useful to persons carrying out economic or commercial activities.