...ACCOUNTING PRINCIPLE My first day of my first Accounting class had to have been my most memorable. After my Accounting teacher, Mr. Mazza, introduced himself he went over the objective of the course. Within five minutes every student had the “deer in the headlight’s” look on their face. I wanted to get up and walk out of the class thinking I’m in over my head with this class. Then he starting slowing his explanation down and brought it down to the basic by explaining the basic account equation (Assets = Liabilities + Stockholders’ Equity). By the end of the class hour, he made us feel confident we would be able to understand and explain Accounting 101. I will explain the four basic financial statements and their purpose. Also, how each financial statement would be useful for internal and external users. If you are not good at math, well that’s ok, because the only math you need to know is basic adding and subtracting. If you want to know the financial strength of a company, then you would want to look over the company’s financial reports. Every quarter publically traded company has to release their Quarterly Earnings Report. They also have to release their Annual Report. In these reports are the financial records of the company. In the each of these reports are the four basic financial statements; Balance Sheet, Income Statement, Retained Earnings Statement and Statement of Cash Flows statement. The balance sheet reports the complete financial picture at a given period...
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...Financial statements Financial Statements - Purpose of Accounting ACC 280 May 17, 2011 Carol Harker Financial Statements - Purpose of Accounting Every business has a need to generate profit and remain in the black. In today’s business world, it is important to have the means to track and monitor the gain or increase of income and profits within the organization. According to Weygandt, “Accounting can be defined as activity that is used to identify, record, and communicate the economic events of a business.” (Weygandt. 2008.) Included in the report we will discuss the purpose of accounting and identify the four basic types of financial statements that are used. Finally we will discuss how the core financial statements of accounting are connected to each other and their uses for all stakeholders in a company. The purpose of accounting is to keep track of economic events for a business. “Accountants are primarily employed to track the flow of money through an organization” (QuickMBA, 2010). Good accounting practices make it easy to keep track of finances for any type of business. “Keeping an accurate balance sheet is a fundamental part of running even the most basic of an organization” (QuickMBA, 2010). Activities such as sales, purchases, and any interest earned from investments are classified as economic and posted to a specified account record. Accountants have a code of ethics that they must adhere to ensure integrity in the reporting process. The use of an accounting...
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...Tomorrow's Products Internal Correspondence To: Mr. T.J. Cerrillo From: De'Lisa L. Davis Subject: Companies Financial Statement Analysis BYP2-8 Date: September 17, 2013 Mr. Cerrillo, as the new Chief executive officer of Tomorrows Products, the Accounting Department would like to welcome you to the company. We would also like to stress how important it is for our company financial statements to be accurate as possible for our Board of Directors meetings at the end of every month. As the Chief Financial Officer, I would like to extend any help from the Accounting Department to assist you at anytime you feel you have any discrepancies in our statements. The owner brought to my attention in our last board of directors meeting that you were having minor issues with the reports; I want to setup a meeting with you to show you specific tools that you can use to analyze the companies financial statements. I would like to point out the three main ratio analysis we use for analysis of primary financial statements, the profitability, liquidity, and solvency ratios. Profitability ratios measure the income or operating success of a company for a given period of time. For example, from the last income statement I emailed to you Wednesday, you will notice that the companies sales increased by net income decreased during the period. To evaluate the companies profitability we will use ratio analysis. The liquidity ratio measures the short term ability of the company...
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...Financial Statements Paper By Becky Lapointe University of Phoenix Accounting 280 Instructor: Silvana Moffitt Ever wonder how businesses like Apple, Wal-Mart, Home Depot, Lowe’s, or even Verizon keep themselves in business. It does not just have to do with marketing skills or good advertisements but these businesses also have to take into consideration the financial information when running these types of corporations. Accounting is a big part of running any type of company or corporation. To understand an organization, people have to look at the financial information, and this is how the accounting comes into play. This is the place that tells the company whether they will be able to pay their employees a bonus, how sales are going for that fiscal year, etc. To understand the purpose of accounting, we first need to see how it works. As well as look at the different financial statements that come along with working in the accounting field of business. Accounting Accounting has been a popular business career choice for people. This is one of many career fields on campus that students will go for. Ever wonder how the founder of Nike, the director of the Federal Bureau of Investigation, and the co-founder of Home Depot obtained their start in business. Besides receiving a degree in business, these people also went on to receive an undergraduate degree in accounting. These people wanted to understand financially firsthand what was going on in their organizations (Weygandt...
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...Accounting Processes’ and Financial Statements The purpose of this paper is to provide a foundation of knowledge for accounting and financial bookkeeping. To accomplish this, I will focus on two areas. First, I will provide some general definitions for common accounting processes and ideas; namely, generally accepted accounting principles, double entry accounting, historical cost, accrual basis versus cash basis accounting, and current assets and liabilities versus non-current items. Second, I will examine recent financial statements for three companies (i.e. Samsung, Lockheed Martin, and RTL Group), specifically their balance sheet, income statement, and statement of cash flow. This examination will include a prediction of future company trends concluding with which ever imparts a better sight picture for future financial and company growth, net income versus cash flow. Defining the aforementioned terms and examining our three companies will demonstrate some core foundational accounting principles and terminology. The term ‘generally accepted accounting principles’ (i.e. GAAP) has a very specific meaning for accountants and auditors. A code of professional conduct prohibits accountants from making statements that would imply or assert financial statements or other financial data conform to ‘generally accepted accounting principles,’ unless they actually fell within those principles promulgated by a body designated...
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...Financial Statements: Foundational Accounting Principles and Terminology Shane R. Wagner TUI University Module 1 Case Study 29 August 2010 Abstract This paper will discuss the common fundamental accounting principles and analyze the financial statements of three major businesses. A basic understanding of the General Accepted Accounting Principles and the standards established within these practices, allow for investors to obtain an accurate snapshot of the financial health of a business. The different methods of documenting both current and future transactions, can have an impact on the information portrayed by the financial statements of an organization. In addition, the basic format of the financial statements can disclose additional considerations of the business, as will be discussed in the analysis of three major businesses within this paper. Information for the analysis portion was retrieved from the financial statements included in the assignment. Keywords: Accrual Basis Accounting; Cost Basis Accounting; Current Assets and Liabilities; Double Entry Accounting; Financial Accounting Standards Board (FASB); General Accepted Accounting Principles (GAAP); Historic Cost; Non-current Items; Security Exchange Commission (SEC); Financial Statements: Foundational Accounting Principles and Terminology Introduction The basic of understanding of an organizations financial statement requires one to be familiar with fundamental accounting principles...
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...Touro University International ACC403 Principles of Accounting Module 1 Case Assignment Dr. Paul Watkins Introduction, Review of Accounting Process and Financial Statements According to about.com (http://about.com), Generally Accepted Accounting Principles (GAAP) refers to a set of extensively customary bookkeeping principles, established by the Financial Accounting Standards Board (FASB) (http://www.fasb.org/), and used to regulate fiscal accounting of public corporations. The FASB was formed in 1973, replacing the Accounting Principles Board and the Committee on Accounting Procedure of the American Institute of Certified Public Accountants before it. The FASB is a private body whose operation is to “institute and advance values of economic accounting and reporting for the supervision and instruction of the public, the FASB circulate GAAP. GAAP is important in accounting because it is the set standard for companies to follow. In its simplest terms, current assets are what you own and liabilities are what you owe. Current assets are those assets that can readily be converted to cash. Bank accounts are of course most readily convertible, but any assets that can be converted to cash within a short time are current assets. Current liabilities are those liabilities which have to be paid off within a short time. Equity is what is left over. It is your net worth. Non-current items are broken down into two categories non current assets and non-current...
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...organizations need to take different decisions for their business activities. * Financial information is needed for decision making purpose. * Book keeping and Accounting will provide such information. * Meaning of Financial Accounting * Process of identifying, measuring, classifying, recording, summarizing and interpretation of the transactions of a business in terms of money to ascertain the result and financial position of business activities of particular period. * Accounting is the art of recording, classifying and summarizing, in a significant manner and in terms of money, transactions and events which are in the part at least, of a financial character and interpreting the results there of.- AICPA * Its features are- * Financial language * Financial information * Systematic process * Functions * Information system * The Purposes of Financial Accounting The objectives of accounting are- * To maintain records- * To generate accurate and authentic information, all the financial activities needs to be remembered which will not be possible without keeping records. As accounting helps to memorize all the transactions with records, it is the objective of accounting. * To ascertain operating results- * Accounting ascertains whether the business has earned a profit or suffered a loss by preparing profit and loss statements,...
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...Chapter 1 The Fundamentals of Accounting MULTIPLE CHOICE QUESTIONS B2C01T1Q001eng In financial accounting, the information reported is expected to have which of the following attributes? | |Presented in |Financial statements are | | |a standard format |prepared on a regular basis | |A. |No |Yes | |B. |Yes |Yes | |C. |No |No | |D. |Yes |No | Answer: B B2C01T1Q002eng Financial statements A. are a process of recording daily transactions. B. are one of the two major branches in accounting. C. report past results. D. do not involve personal judgements. Answer: C B2C01T1Q003eng Which of the following is/are not (a) financial statement(s)? i) Bookkeeping ii) An income statement iii) A tax return iv) A balance sheet A. (i) B. (i) and (iii) C. (i) and (iv) D. (ii) and (iii) Answer: B B2C01T1Q004eng A person who studies the financial statements of a business and decides whether the business should continue to operate is A. the owner of the business. B. a potential investor. C. the auditor of the business. D. a teacher or student. Answer: A ...
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...CHAPTER 2: REGULATION IN FINANCIAL ACCOUNTING Chapter 2 regulation in Financial accounting LEARNING OUTCOMES Upon completion of this chapter you should be able to understand: • The difference between management and financial accounting. • Why accounting regulations are important and required. • The need for and the structure of professional regulation, company law, stock exchange legislation and EU Directives. • How the different aspects of regulation work together and complement each other. • The process through which an accounting standard comes into being. REVISION RESOURCES EXAM QUESTIONS: Sample and Past papers are available from the website of Accounting Technicians Ireland and are essential aids when studying Advanced Financial Accounting topics. 7 Chapter 2 : Regulation in Financial Accounting 2.1 Advanced Financial Accounting the FunCtion oF FinanCial aCCounting and reporting The International Accounting Standards Board (IASB) in their Conceptual Framework for Financial Reporting state that ‘the objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity. Those decisions involve buying, selling or holding equity and debt instruments, and providing or settling loans and other forms of credit’. This Conceptual Framework...
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...CHAPTER 1 ACCOUNTING: INFORMATION FOR DECISION MAKING OVERVIEW OF BRIEF EXERCISES, EXERCISES AND CRITICAL THINKING CASES Brief Exercises B. Ex. 1.1 B. Ex. 1.2 B. Ex. 1.3 B. Ex. 1.4 B. Ex. 1.5 B. Ex. 1.6 B. Ex. 1.7 B. Ex. 1.8 B. Ex. 1.9 B. Ex. 1.10 Learning Objectives 1, 3, 5 2,5 3,4 5,6 1, 3, 5, 6 5, 6 2, 5, 6 7, 8 5, 7 1 Topic Users of accounting information Components of internal control Inexact or approximate measures Standards for the preparation of accounting information FASB conceptual framework PCAOB COSO Professional certifications in accounting AICPA code of professional conduct Personal benefits of accounting skills Skills Analysis Analysis Analysis, judgment Analysis Analysis Analysis, research Analysis, ethics Analysis Analysis, ethics Analysis Exercises 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12 1.13 1.14 1.15 1.16 Topic You as a user of accounting information Real World: Boeing Company, California Public Employees Retirement System, China Airlines Users of accounting information What is financial reporting? Generally accepted accounting principles Accounting organizations Investment return Accounting terminology Accounting organizations Financial and management accounting Management accounting information Accounting organizations Purpose of an audit Audits of financial statements Ethics and professional judgment Careers in accounting Home Depot, Inc. general information Learning Objectives Skills 1 Analysis, judgment 3, 4 Analysis, research ...
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...BUS5AFS ACCOUNTING AND FINANCE FOR SUSTAINABLE VALUE CREATION Topic 2: Principles of Accounting Semester 1, 2014 ACCOUNTING AND FINANCE FOR SUSTAINABLE VALUE CREATION TOPIC 2: PRINCIPLES OF ACCOUNTING La Trobe Business School BUS5AFS: Topic 2 – Principles of Accounting 1 Topic Learning Outcomes 2.1 2.2 2.3 2.4 2.5 Discuss the nature and purpose of accounting. Explain the five basic financial elements of a business. Explain the underlying concepts of recognising and measuring the financial elements. List the four basic financial statements used in business decision making. List the basic tools for analysing financial statements. BUS5AFS: Topic 2 – Principles of Accounting 2 La Trobe Business School Prescribed reading Hill, G. and Martin, T. Principles of Accounting and Finance Pearson Australia, 2014 Chapter 2 La Trobe Business School BUS5AFS: Topic 2 – Principles of Accounting 3 1.1 Discuss the nature and purpose of accounting. PURPOSE OF ACCOUNTING …….. to provide information to permit informed judgments and decisions regarding the allocation of resources, managing & directing those resources, custodianship (stewardship) & mandatory requirements …….. La Trobe Business School BUS5AFS: Topic 2 – Principles of Accounting 4 ACCOUNTING VALUE ADDS • • • • • • Improve quality and reduce costs Improve sharing knowledge Improve supply chain Improve efficiency and effectiveness Improve internal control Improve decision...
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...WHAT IS ACCOUNTING? Identify Communicate What is the purpose of accounting ? Measure Record 9 3 8/13/2014 WHAT IS ACCOUNTING? Accounting information is important because it… Assists decision making Provides information about the past, present and future performance of an entity Measures business activity 10 WHO USES ACCOUNTING DATA? Internal users External users Managers who plan, Investors who make organise and run the decisions to buy, hold or business sell shares e.g., marketing Creditors who evaluate managers, production risks of giving credit and supervisors, chief lending money financial officers, other e.g., suppliers, bankers employees Government and regulatory bodies e.g., ATO, ASIC 11 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) In order to measure, process and communicate financial information, accountants follow rules, principles and standards. These rules, principles and standards are set by International Accounting Standards Board (IASB) Australian Accounting Standards Board (AASB) Financial Reporting Council (FRC) Australian Securities & Investment Commission (ASIC) 12 4 8/13/2014 SOME PRINCIPLES AND ASSUMPTIONS Time period •Economic information can be captured and communicated over short periods of time Monetary unit assumption •Only data that can be expressed in terms of money is included in the accounting records Economic entity assumption •Can be any...
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...Accounting Cycle Paper ACC/421 Accounting Cycle Paper In this paper I will outline the purpose of both accounting and financial reporting within an organization in general. I will also give a description of the people, processes, and systems that are a part of the accounting and financial reporting processes followed by a conclusion. Purpose of Accounting The purpose of accounting to gather and report on any financial information within the organization about things such as: the performance of the company, their financial position, and the cash flows of the company. With this information the company can then make business decisions about management of their business, investments to be made, or money they can lend. All of this information is known as the accounting records and accounting transactions and recorded as invoices for either suppliers or customers of the company. Once the financial information has been added to the accounting records it is all put together into financial statements to include the following: income statement, balance sheet, statement of cash flows, statement of retained earnings, and any disclosures. Purpose of Financial Reporting Documents, or the financial reports, are gathered in order to keep track of money going in or going out. Essentially, there is a record of how much money your business is making or losing. Anyone investing in the business has the right to know how their money is being used and can know this by looking at the financial...
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... ПЕРЕВІРИЛА: Харків 2012 MINISTRY OF EDUCATION AND SCIENCE, YOUNG PEOPLE AND SPORT OF UKRAINE KHARKIV NATIONAL UNIVERSITY OF ECONOMICS Department of Foreign Languages “Purpose and Principles of Accounting” “Accounting and audit” Faculty (2-2) Supervisor: Kharkiv 2012 Accountancy Accountancy is the process of communicating financial information about a business entity to users such as shareholders and managers. The communication is generally in the form of financial statements that show in money terms the economic resources under the control of management; the art lies in selecting the information that is relevant to the user and is reliable. Accountancy is a branch of mathematical science that is useful in discovering the causes of success and failure in business. The principles of accountancy are applied to business...
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