Tax is something that everyone has to pay. If you own your own business then this is something that you will have to sort out yourself, but if you are an employee this will get sorted out for you. Tax is essentially a "financial charge" which is added to things that you purchase or is deducted from something that you get. Tax is collected for the purpose of the Government to spend on things that will benefit society. It goes towards things such as road works, the police and healthcare services, courts and general infrastructure. In the UK it is also put towards welfare benefits such as job seekers allowance. Tax is collected by HMRC and they are responsible for collecting and managing them. Most countries have a tax system in place and use a flat percentage rate of taxation on the amount that people earn. Taxes are involuntary fees that you have to pay and each person in society is responsible for doing so. There are three main types of tax and these are proportional tax, progressive tax and regressive tax. Proportional tax is where the same percentage of tax is imposed on everyone no matter how much someone might earn. Progressive tax means that those who earn more have to pay a larger amount of tax. As income increases, so does the amount of tax that a person has to pay. Regressive tax is where those on lower incomes have to pay a higher percentage rate of taxation than those that earn more.

Accounting is one of the most vital parts of your business and is the process of recording all the financial transactions that take place. It could be handled by an individual, an accountant or a large finance department depending on how many financial elements there are that need looking after within the company. There are many different types of accounting that come under the term of "accounting" and these including financial accounting, managerial accounting and cost accounting.

Managerial accounting: Managerial accounting is a form of accounting that mainly focuses on the measurement, identification and analysis of accounting for business owners to make informed future decisions. It is designed to help managers to achieve business goals and help to get a better focus on cash flows, financial transactions, rate of return and any operating costs that the business might entail. Managerial accounting is important as it ensures that companies effectively perform the functions that they are designed to do. It analyzes data such as trend predictions and takes into account qualitative information that you cannot measure in monetary terms. This includes strength of research and development, industry cycles and development.

Financial accounting: Financial accounting is another form of accounting and is primarily focused on the transactions that take place within a business. It involves recording, summarizing and reporting on the different transactions that occur over time. From this, financial accountants will put together financial statements such as a balance sheet, income statements, cash flow statements and records on how the company has been performing over a set period of time. The reports that the financial accounts department must make are in the form of financial statements and can be distributed to those outside of the company. Because of this it is important that the reports are properly conducted. They must be made in accordance with the accounting principals in place to ensure they are properly regulated. Financial accounting can be performed with two main methods - accrual method or a cash method (or sometimes through a combination of the two.) Accrual means that transactions are recorded when they occur and therefore it is easy to recognize what the revenue is. Cash accounting is a little more complex and records transactions upon when cash is exchanged. This means that revenue is recorded when payment is received and expenses once payment of the obligation occurs.

Cost accounting is essentially cost control. It is the process of recording, analyzing and reporting both the fixed and variable costs of a company that is related to a product's production. The reason that it is in place is so a company can keep an eye on its budgets and spending accordingly, making sure it is running as efficiently as cost-effectively as possible. It allows companies to budget better, seeing exactly what is being spent where (such as utility bills), companies to be more efficient and therefore use this data to make more profit.

Accounting is vital for any business and is the way that you record what you have coming in and coming out. Without accounting you wouldn’t know how much profit you make in a year, whether you are doing better or worse month on month and could fall behind on any payments that you are due to make.

Tax and accounting are both different things but are both very essential for a business. Tax is something that every company out there is required to pay and is not something that is voluntary. You need to pay it otherwise you will incur large fines and be penalised for not doing so. Accounting is the people within your company (or that you outsource the work to) that sort out your taxes and other financial elements. They are integral to the smooth running of your business. Here at Smart Solutions Taxing and Accountants we are on hand to help you out with your taxes and accounts, please get in touch with us today.