...shareholders. Because shareholders are generally not able to monitor management on a day-to-day basis, they delegate that responsibility to the board of directors. The board is responsible for raising and pursuing difficult questions with top management. Because the board is responsible for monitoring entity activities, it is important to include insiders on the board to ensure that the board has the necessary information about company transactions and activities to make decisions that are in the best interests of shareholders. Thus, most company boards of directors include several members from the company’s top executive team as full members of the board. Those members help provide necessary information to the board as it makes key decisions. However, there are risks of including too many top executives on the board. To help prevent the board from becoming an instrument of top management that could be manipulated to management’s versus the shareholders’ best interests, it is important that outsiders (i.e., individuals who are not employed by the company) be included on the board as directors. Representation of outsiders helps...
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...prior to doing so is the financial statement of the company. For small business as well as large firms, Investors and Creditors use a company’s financial statement to understand and analyze the financial condition of the firm and to see how well the firm is performing. Per Way, J. (n.d.), managers give great importance to the financial statements since publishing financial statements can provide management or senior leadership with tools to be able to communicate regarding the company’s accomplishments with interested outside parties. There are many ways to evaluate a firm’s performance, but the best way to do so, is by looking at actual numbers of profits and loss which is clearly reflected in the financial statement of the firm. Thus, a financial statement should be used an optimal tool to evaluate a firm’s financial standing before buying or investing in it. A firm’s financial statement consists of many different components. There are various ways a firm can evaluate their financial accomplishments. One such way is via an Income Statement. A typical income statement would consist of a firm’s expenses and sales revenues over certain period of time. This time could range from a month or quarter, semi-annually or annually. If someone wants to evaluate the bottom line income of a firm to understand how well the firm is doing, it is a two-step process. First, the firm’s operating income needs to be calculated by removing expenses from the income statement. After that,...
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...three years -AWC survives on quality, price and efficiency • Canada-US trade agreement-competition in local market but US market is now accessible • New product-unique, price high volume order • Second welding line to meet the demand of the new product • Noncompliance with the Government Regulations regarding pollutions • Present welding line exposes employees to toxic products, also damaging for the environment • Recently government sensitiveness on environment related issues • Punishable offence under law with considerable probability. • Emissions systems- Exhaust systems Recirculating emissions, more expensive, satisfying employee safety and environment regulations • Impact on cash flow (for insolvency), and income statement. Problem Statement Whether AWC Inc. should go for the emissions control...
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...Introduction: Financial accountancy (or financial accounting) is the field of accountancy concerned with the preparation of financial statements for decision makers, such as stockholders, suppliers, banks, employees, government agencies, owners and other stakeholders. Financial capital maintenance can be measured in either nominal monetary units or units of constant purchasing power. The central need for financial accounting is to reduce the various principal-agent problems, by measuring and monitoring the agents' performance and thereafter reporting the results to interested users. Financial accountancy is used to prepare accountancy data for people outside the organization or for those, who are not involved in the mundane administration of the company. Management accounting, provides accounting information to help managers make decisions to manage and enhance the business. In short, financial accounting is the process of sum-arising financial data, which is taken from an organization's accounting records and publishing it in the form of annual or quarterly reports, for the benefit of people outside the organization. Financial accountancy is governed not only by local standards but also by international accounting standard. 2. Role of Financial Accounting: • Financial accounting generates some key documents, which includes profit and loss account, patterning the method of business traded for a specific period and the balance sheet that provides a statement, showing mode of...
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...OF CURRICULUM DESIGN Financial Accounting ATLANTIC INTERNATIONAL UNIVERSITY TABLE OF CONTENTS Introduction ………………………………………………………….3 History ……………………………………………………………….3 Description………………………………………………………….....4 Financial Reporting …………………………………………………..5 Accounting Principles…………………………………………………6 Balance Sheet…………………………………………………………7 Income Statements……………………………………………………8 Other Financial Statements…………………………………………..9 Bookkeeping Cycle…………………………………………………….9 Regulations and Standards…………………………………………..11 Accounting Reforms…………………………………………………..12 Biological Assets Research…………………………………………...13 Literatures Review……………………………………………………..14 Methodology and Model…………………………………………….... 16 Findings………………………………………………………………….18 Conclusion……………………………………………………………….19 References………………………………………………………………20 Financial Accounting INTRODUCTION Financial accounting refers to information describing the financial resources. Obligation and activities of an economic entity (either an organization or an individual). Accountants use the term financial position to describe an entity’s financial resources and obligations at appoint in time and the term results of operations to describe its financial activities during the year. Financial Accounting encompasses the record-keeping aspect of accounting...
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...important project. As I was analyzing the papers provided, I realized that additional information is requested by your representatives. It was brought to my attention that ADT and its affiliates are unclear about why the additional information was requested on the adjusting lower cost of market inventory on valuation, the capitalizing interest on building construction, the recording of gains or losses on asset disposal, and the adjusting goodwill for impairment. The adjusting lower cost of market inventory on valuation is specified in Accounting Research Bulletin No. 43 (ARB No. 43). The Statement of Financial Accounting Standards (SFAS) No. 34 is the statement, which deals with capitalization of interest as part of the cost of the asset. The SFAS No. 144 addresses the reporting and accounting for the impairment of the disposal of long-lived assets. New rules for the accounting for goodwill have been addressed in SFAS No. 142. To be able to complete the analysis of the work papers of my clients’, certain information must be obtained. To alleviate the concern of the client of why the information is requested analysis of each topic and its importance will be discussed in this paper. The adjusting lower cost of market inventory valuation is essential because through the life cycle of inventories, the inventories will decline in value. Although the primary basis of accounting for inventories is cost, when inventories usefulness become lower than cost, then the use of adjusting lower...
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...Analysis of Working Papers of ABC Company Upword Accounting, LLC, in response to concerns regarding requests for information within the working papers, has prepared details to address questions pertaining to the following specific elements: • Adjusting lower cost of market inventory on valuation • Capitalizing interest on building construction • Recording gain or loss on asset disposal • Adjusting goodwill for impairment The details will incorporate the reason behind why the element was established, the impact on financial reporting, current and future implications on the element, we will review each of these elements individually. Adjust lower cost of market inventory on valuation Adjusting lower cost of market inventory on valuation is a requirement of Generally Accepted Accounting Principles in the United States that inventory be recorded a the lower of either the cost to produce it, the cost to repurchase it or the market value of the inventory (www.investopedia). The lower of cost and market method has two boundaries on the valuation of inventories. The first is the inventory ceiling, which requires that inventory must be reported no higher than the net realizable value less expenses. The second boundary is the inventory floor, which required that inventory value be reported at no lower than the net realizable value plus normally attainable profit. The rule of lower of cost or market is intended to provide a means...
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...require that every auditor must have a formal university education, practical training, and experience in auditing, and continuing education in the auditor’s professional career (Boynton W. & Johnson R., 2006). Therefore, training and ability are very important. An auditor must also be able to think objectively. An auditor cannot have any encouragement from outside sources in decision-making. The last general standard is that the auditor must be proficient and avoid any careless mistakes while contributing to the audit in review (Boynton W. & Johnson R., 2006). Standards of Fieldwork The second element is standards of fieldwork. The standards of fieldwork are the conduct of the auditor while at the entity’s place of business (Boynton W. & Johnson R., 2006). Organization is a very important task while out in the field during an audit. The auditor will have tactics and schedules in place for all personnel assisting with the audit to ensure proper motivation and supervision is given. The auditor will need to know about the entity’s business practice, accounting policies, external factors, entity’s objectives, reviews of financial performance,...
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...the 1960s, the American accounting profession has been aware of the increasing influence of "outside forces" in the standardsetting process. Two parallel developments have marked this trend. First, individuals and groups that had rarely shown any interest in the setting of accounting standards began to intervene actively and powerfully in the process. Second, these parties began to invoke arguments other than those which have traditionally been employed in accounting discussions. The term "economic consequences" has been used to describe these novel kinds of arguments. By "economic consequences" is meant the impact of accounting reports on the decisionmaking behavior of business, government, unions, investors and creditors. It is argued that the resulting behavior of these individuals and groups could be detrimental to the interests of other affected parties. And, the argument goes, accounting standard setters must take into consideration these allegedly detrimental consequences when deciding on accounting questions.* The recent debates involving foreign currency translation and the accounting for unsuccessful exploration activity in the petroleum industry have relied heavily on economic consequences arguCopyright © 1978 by Stephen A. Zeff. *Ed. note: For the opinion of an accounting standard setter, see Oscar S. Gellein's article in Statements in Quotes, p. 75. ments, and the Financial Accounting Standards Board and the Securities and Exchange Commission have become extremely...
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...Chapter 2 Worldwide accounting diversity Chapter Outline I. Considerable differences exist across countries in the accounting treatment of many items. These differences can result in significantly different amounts being reported in the financial statements prepared by companies using different GAAP. II. A variety of factors influence a country’s accounting system. A. Legal system – in code law countries, accounting rules tend to be legislated; common law countries tend to have a non-legislative organization that develops accounting standards. B. Taxation – financial statements serve as the basis for taxation in many countries. In those countries with a close linkage between accounting and taxation, accounting practice tends to be more conservative so as to reduce the amount of income subject to taxation. C. Providers of financing – in those countries in which family members, banks, and the government are the major providers of business finance, there tends to be less demand for public accountability and information disclosure. In countries where shareholders are a major provider of financing, the demand for information made available outside the company becomes greater. D. Inflation – countries with chronic high inflation adopt accounting principles in which traditional historical cost accounting is abandoned in favor of inflation adjusted figures. E. Political and economic ties – through previous colonization, a British style of accounting...
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...from the parties that have interests in financial statements of a given entity. It is usually an attitude that is characterized by the mind of the auditor and his integrity to get an approach that has the objectives of the audit process because the auditor is required to do his work freely in this objective manner (Basu, 2008). One of the purposes of an audit is to make sure that the financial statements are credible by providing assurance that is written and is reasonable from a source that is independent, true and with fair view according to the accounting standard. One of the companies that were audited by an outside source is Uvorcop and it was audited using the freedom of an auditor(Sharma, 2005). An objective like this can only be met if the people using the audit report are convinced that the auditor might have been influenced by parties like the directors in the company or other interests that are bringing conflicts like when the auditor happens to own shares in the same company that is being audited and has issues with the company (Nicoll, 2005). Conclusion Finally, contracting services that are against fraud and provide security to companies is a very important and wise investment for any company to take since it ensures that a company implements ethical business behavior. This is also very important in a company since it ensures that the performance of the company is improved on a daily basis. Understanding the importance of the independence of the...
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...Financial Management for NPO I. Introduction “Ten years ago, management was still a dirty word for those involved in nonprofit organizations. Nonprofits prided themselves on being free of the taint of commercialism and above such sordid considerations as the bottom line… Today, nonprofit organizations have learned that they need management and leadership even more than business does…” (Montana and Petit, 2009) The years when “management” was a prohibited word in nonprofit organizations are long gone. Nowadays, nonprofit leaders are starting to realize what an essential role financial management plays in NPOs. Moreover, as the number of nonprofit organizations around the world keeps rising, more nonprofit leaders and managers have aimed to develop their skills in financial management. As a matter of fact, the nonprofit sector is one of the fastest-growing sectors around the world: just in the United States there are 1.5 million nonprofit organizations and growing, employing one in 10 American employees. In this paper, we will look at: 1) the financial management process, 2) the importance of financial management for nonprofit organizations, 3) financial management for nonprofits organizations. II. What is Financial Management? One of the most accepted definitions of financial management was given by Kuchal, stating that “Financial Management deals with procurement of funds and their effective utilization in the business” (as cited in Paramasivan & Subramanian...
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...large energy company and was among the top ten largest companies in America before its downfall into bankruptcy. The failure of Author Andersen and Enron is still a puzzling, outside America. Auditing and accounting principles in the United States of America are considered strong and sophisticated. Transparency and disclosure are really emphasized in American companies, and because of this the downfall of Andersen and Enron still raises questions. This has since become a case of reference in review of issues concerning financial reporting and auditing. It has also been used to explain about regulations on auditing and accounting inside and outside America. This case has brought about huge implications on corporate governance to other countries. Enron Corporation declared its bankruptcy in the year 2001. Afterwards, Anderson’s downfall occurred in 2002. It has been a big question, outside America, on what brought about this failure. The General Accepted Accounts Principles, in the US, are very well developed. These principles require clear disclosures of financial statements that are audited. They also require an established federal agency and a commission to monitor financial reporting. Cases have been written, from the failures of Enron and Andersen, for the exploration of accounting, auditing and financial reporting issues in the US. The head of auditing of Enron Corporation was fired during the company’s downfall for destroying important documents, upon realizing that the...
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...Accounting and Financial Statements Introduction The purpose of this chapter is to identify some of the concepts of Understanding Accounting and Financial Statements in the business world. Learning objectives 1. Explain the functions of accounting, and identify the three basic activities involving accounting. 2. Describe he roles played by public, management, government, and not-for-profit accountants. 3. Identify the foundations of the accounting system, including GAAP and the role of the Financial Accounting Standards Board (FASB). 4. Outline the steps in the accounting cycle, and define double-entry bookkeeping and the accounting equation. 5. Explain the functions and major components of the four principal financial statements: the balance sheet, the income statement, the statement of owner’s equity, and the statement of cash flows. 6. Discuss how financial ratios are used to analyze a company’s financial strengths and weaknesses. 7. Describe the role of budges in a business. 8. Outline accounting issues facing global business and the move towards one set of worldwide accounting rules. 1. Explain the functions of accounting, and identify the three basic activities involving accounting. Accounting measure, interpret, and communicate financial information to parties inside and outside the firm to support improved decision making. Accountants gather, record, and interpret financial information to management. They also provide financial information...
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...The standard setting process The recent, high profile accounting scandals shook the foundations of the capital markets. Financial reporting furnishes investors and other stakeholders with reliable and relevant information. In the short term unethical financial reporting resulted in loss of billion dollars, but in the long term the impact was even more severe: loss of confidence in financial reporting as reliable source of information. The following reforms aimed to restore investor confidence in financial reporting and accounting profession. They reinforced the importance of ethics in financial reporting and provided recommendation on accounting standard setting process. The following paper provides a brief discussion on standard setting organizations and process and the authoritative sources of accounting. This study also covers the objectives of financial reporting and its role in today’s economy and concludes that ethics will remain cornerstone of the accounting profession. Table of Contents Abstract 2 The standard setting process 4 Standard setting process and authoritative sources of accounting information 5 Objectives of financial reporting 6 Ethics’ role in financial reporting 6 Conclusion 7 References 10 The standard setting process The dawn of the new century brought an economic downturn. The tragic events of 9/11 and the burst of the dot.com bubble accelerated the general decline. Investors kept corporate managements under constant pressure...
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