A Forex Managed Account Vs Trading Yourself

Investing in Forex can sometimes become very challenging especially when you have a career, family, and many other time consuming responsibilities. This is why several people choose a Forex managed account over a self traded account.

In this article we will be reviewing the main advantages and disadvantages of investing in currencies through a Forex managed account and an account that you trade yourself.

Take all the guesswork out of Forex trading with Forex managed accounts: Investing and trading the Fx market can become a very frustrating task for several traders who are not succeeding at it. Many investors have experienced substantial losses by trying to invest in Forex on their own.

Some of them have bought courses and trading systems to try to become successful traders but have failed because they lack other qualities to become a successful trader such as appropriate money management and trading psychology.

When you invest in a Forex managed account you can successfully take all of the guesswork and difficulty out of Forex trading since you will have a professional Forex trader manage and operate your account for you.

Paying performance and management fees against taking losses on your account: It is important to consider the real cost of not succeeding at trading Forex on your own. Several traders lose trading account after trading account by investing themselves in currency trading.

This is why considering and measuring the real cost of unsuccessful trading against paying a money management a performance fee for trading your account for you. Many times paying a performance fee to have a Forex managed account makes more sense than continuing to lose money in the markets.

Taking advantage of someone else’s success by having them manage your account: This is a practice that can be seen in several professional areas in life. You buy a book written by a famous chef to learn how to prepare a new meal or you attend a conference on how to earn more by doing what you like to mention two examples.

We hire and follow experts and professionals to increase our probabilities to succeed in certain areas of life. Trading is no different. You wouldn’t try to take your own tooth out or would try to build a house with an architect. Then why would you try to trade alone or on your own?

Having a professional Forex trader and fund manager trade your account for you can significantly increase your chances to succeed in currency investments.

Diversifying your trading by investing in someone else’s strategy as you trade: Maybe you want to continue to trade but would like to also diversify your currency investments by investing in someone else’s trading system.

This can become a great way to not only diversify your investments but to hedge against your losses in your own trading. When you have a Forex managed account that is being professionally traded by a Forex trader and money manager you will be able to earn while you learn and continue to trade on your own.

We hope this article has helped you to understand how a Forex managed account differentiates from a Forex trading account that you operate yourself.

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Financial Accounting and Management Accounting – An Overview

This article deals with a brief overview of some of the differences between financial accounting and management accounting systems. But at first let us understand what accounting is.

What is accounting? Accounting may be defined as a system of collecting, summerising, analysing, and reporting in financial terms, information about a business organisation. The business accounting as understood today, comprises of, financial accounting, and management accounting. These two parts of the business system have something in common and there are differences as well.

As a part of the accounting system of business enterprises, these two differ from each other in many respects.

The first difference is in its structure or formats of its presentation of information. Financial accounting has a single unified structure of presentation, which means, that the information relating to enterprise business system is presented more or less on a uniform basis. The end products of financial accounting are its three basic financial statements, and these are:

- The balance sheet.

- The profit and loss account/income statement.

- The statement of changes in financial position.

The balance sheet presents the financial position of an organisation at any point of time. The profit and loss statement would contain the organisation’s financial performance over a specified period of time, which is usually one year. The inflow and outflow of financial resources of an organisation during a period of time is reported in the statement of changes.

The financial statements prepared are based upon an equation or model, which implies, that all organisations present their financial statements on basis of a uniform structure. This would mean that financial accounting has a unified structure.

Primarily, financial statements are usually meant for people outside the organisation, such as, shareholders, creditors, government, the general public, and like others. These people also get such reports from other organisations, and to maintain uniformity in these statements, financial accounting system uses a unified structure system.

On the other hand, management accounting is mainly concerned with the in-house management. Since the accounting statements are used internally, it varies in structure from organisation to organisation, depending upon the circumstances and requirements of individual use. Therefore, management accounting is tailored to meet the needs of the management of the particular organisation.

The next difference is in the generally accepted accounting principles. Financial accounting is prepared in accordance with the Generally Accepted Accounting Principles, which in short is known as GAAP. Preparation of financial statements following GAAP ensures that the account presentations have been prepared on basis of a norm, as per the general guidelines issued by law.

On the other hand, management accounting is an in-house requirement, and is for the exclusive use of the management of the organisation. These management accounting statements are never made available to the outsiders, and hence could be formulated in the manner as wanted by the in-house management.

The third difference between financial accounting and management accounting is the statutory requirement of preparation of accounts. As discussed above, financial statements are prepared solely for the people outside the organisation, who have interests in the business operation of the organisation. There are shareholders, who would use the information contained in the financial statements, to decide whether or not to invest in the organisation. By law it is mandatory to prepare such statements, and it is a statutory obligation. In fact, the company law not only makes it mandatory to prepare such accounts, it also has laid down the structures, based on which such financial statements need to be prepared.

The fourth difference is the reflection of historical accounts. As mentioned above, there are three types of financial accounting statements that are prepared. Within these three, while the balance sheet and the profit and loss account, report the financial position on a particular date, and the results of operation of the organisation during a specific period of time respectively, the statement of changes of the financial position reports the inflow and outflow of resources during a particular period of time. Therefore, financial statements record historical data. On the other hand, management accounting does not record any financial history of the organisation.

The fourth difference relates to segment reporting. Financial accounting pertains to the business as a whole, though some organisations segment such accounting for its different operating centres. But, as and when the financial statements are presented, it shows the business as a whole. Contrary to this, the management accounting system may present statements in segmented fashion.

Finally, the financial accounting and management accounting differs in respect of their ultimate objectives. Financial accounting is prepared specifically for external reporting, where-as, management accounts are solely for in-house use.

In this brief presentation, it has become quite clear how financial accounting differs with management account preparation. Both of the accounting systems are vital to any business scenario, and are mandatory requirements in a corporate environment.

Over twenty two years experience in Oracle. Significant development & Management skills viz.,technical writing, project planning and execution, project management, Oracle sql, pl/sql, data flow design, database design, datawarehousing, Oracle applications viz., manufacturing, scm, crm, financials, hrms, workflow, Oracle discoverer, forms, reports, etc., having expertise in Business Analysis. Presently a Sr. Program Manager with a Large IT organisation in London, looking after 10 Oracle applications project in Europe, and managing offshore development partners.

Education:

1. Fellow – Institute of Electronics & Communication Engineers.
2. MSc. Eng (Computer Science), University of London.
3. BSc. Eng (Electronics), University of London.

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How to Produce Management Accounts – A Quick Guide

This guide is primarily aimed at fresh graduates, entry level job hires, professional students, and any individual related to the profession of accountancy (and management accountancy in particular), who wishes to have a quick overview of how a set of management accounts can be produced and what entails in its production, without having to read a 200 page book. Most of the knowledge set out henceforth is from the point of view of working in a service based industry and assumes the reader to have a reasonable knowledge of the fundamental concepts of accounting.

The scope of this guide is to give the readers a sequence of activities that I have followed, in my own experience, to put together a monthly reporting pack for my senior management team. This sequence of activities and the importance that I attach to each activity can be very different for the line of business that you are in. Having said that, I do expect that most of you will develop a more vivid and succinct picture of the production process, which you can then imitate and integrate into your own particular circumstances.

So, let’s begin!

What are we trying to produce?

In most organisations, the board or senior management requires the management accountant/chief accountant to produce a monthly profit and loss account/income statement, so that the organisation’s performance against set budgets (mostly prepared at the beginning of each financial year) and expected forecasts (mostly updated at each month end) can be gauged. A monthly management accounting reporting pack does not only include the monthly income statement, but a range of other useful reports too. However, an income statement does constitute the bulk of the reporting and this is what we will try to produce in this guide.

In a nut shell, through a certain set of activities and for a given period (usually a month), we determine: the revenues generated by the business, the costs incurred in the production of such revenues (commonly known as ‘cost of goods/services sold’) and the costs incurred to provide support to such revenue generation and goods/services production. This cost is sometimes referred to as the central overheads’ costs or support functions’ costs or the service-centre costs.

What you should know before you begin production?

Most businesses will use a “Chart of Accounts” in their accounting systems (may it be: Sage, SAP, Oracle, SUN, Viztopia etc.) to classify and record various types of transactions involving differing kinds of assets, liabilities, capital, revenues, and costs.

A Chart of Accounts or COA, as I like to call it, is a list of all nominal ledger accounts that a business intends to use to record its business transactions. This list of accounts can be in the shape of numbers, alphabets or alpha-numeric values. Due to my own experience, I prefer numbers.

So, to give an example, our full COA might range between the numbers 0001 and 9999 and within this range, we can have multiple ranges, each representing an asset, liability, capital, revenue or costs type. As an example, the range 5000-5999 might only represent different kinds of revenue streams for a business and the range 1000-1999 might only refer to all fixed assets held by the business.

These are just examples of how the COA could be divided. You need to know what range/s of nominal account codes in your business’s COA constitutes the revenues, the cost of goods/services sold, the central overheads, the assets, the liabilities, and the capital.

You will not be able to understand the income statement (which is what you are essentially trying to produce), unless you understand the Chart of Accounts. The income statement is basically reading all data held in the COA range/s relating to revenues and costs for a given month/period.

Once you have understood the division of the COA, you can then truly appreciate the monthly income statement template that your organisation already has in place. If you are assigned the task to build one from scratch, then this guide is not for you. In this guide, we have assumed that your organisation already has a certain monthly reporting template in place, of which the income statement is the main one.

A vast number of organisations produce their monthly management accounts in Microsoft Excel. The income statement, depending on the business, will be divided into multiple sections. For purposes of this guide, we will use the following sections that make up a typical income statement:

• Revenue
• Cost Of Goods/Services Sold
• Gross Profit
• Selling Expenses
• Marketing Expenses
• Contribution To Central Overheads
• Central Overheads Recharge
• EBITDA

Each of the above sections of the income statement will be made up of a number of nominal codes from the COA. As an example, the revenue section of the income statement in MS Excel might be pulling together/summing the data from codes 5000-5999 range from the main accounting software, for a given month. How does excel do that? Well, most organisations use some sort of intermediary excel tool to pull data out from the main accounting software (where a record of transactions sit) onto excel. That is why it is imperative to know your business specific COA, so that you know what makes up revenue and what makes up, lets say, cost of goods sold.

To recapture what we have just said above:

 Before you even open up your business’s monthly reporting pack, of which the income statement template is the most important, you need to understand your Chart of Accounts.
 Most management accounts’ packs/templates, are made in excel
 Transactions are recorded using some accounting software, such as Sage, Sun, Sap etc.
 The monthly income statement template is divided into sections, such as Revenue, Cost of Sales, Gross profit etc. Each section is reading a number of nominal codes from the main accounting software and summing them up for a given periodic month in the ms excel reporting templates.
 This summing/collation of information into excel from the accounting software, using nominal codes, is usually done with the help of an excel Add-on tool.

Hopefully, so far, so good! Let’s move ahead now.

The Production Process

Broadly speaking, the finance department of almost all businesses, ranging from small and medium to big publicly listed companies, can have the following sub-departments, either separately or combined, within the main finance function:

• Sales Order Processing – SOP
• Sales Ledger
• Credit Control
• Purchase Ledger
• Management Accountancy
• Financial Accountancy

On a day to day basis, orders are processed on the sales ledger system. The sales ledger system can exist within a company’s main accounting software or it could be a separate system altogether. The result of sales order processing is the production of sales invoices.

These sales invoices are then chased by the credit control department for collection of the monies due. Once monies are receipted at the bank, such receipts are recorded by the sales ledger department onto the main accounting system.

Alongside this, on a daily basis, the purchase ledger department is processing ‘purchase invoices’ i.e. bills that the business has to pay. For most businesses, the recording of purchase invoices involves:

 Categorizing / classifying each bill to a cost type/s
 Assigning the cost to a specific product &/or department &/or business unit

E.g. If a business has spent £5,000 on printing and binding of a magazine (assuming a magazine is a “product” / “revenue stream” for the business), the purchase ledger manager would record this cost as a direct cost (giving it a direct cost nominal ledger code from the Chart of Accounts) and assign the cost incurred to the “Production Department” and the “Print Publications” Business Unit of that organisation.

The bill is settled in due course by the purchase ledger manager.

The bottom line is that on a day to day basis, sales invoices are being raised and monies received, alongside bills being recorded and settled. At the end of each month or at a cut off date just before the end of a month, you will request all relevant departments to make no further entries in the period for which management accounts are to be prepared. Your management accounts start here!

MPL Media Plc

For the purpose of this quick guide, we will create a fictional organisation, operating in the media industry producing monthly magazines. We shall call it MPL Media Plc.

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