...Accounting principles 2 Every business and organization needs some form of accounting principles to run on. They are the foundations that either makes or breaks a corporation or business. Businesses from the small corner drugstore to the giant health care organizations work using these accounting principles every-day, simply by understanding the techniques used we are to understand the functioning behind them. Several forms of accounting come up with a result, some of these are cash flow, accrual, and fund accounting. Their strengths and weaknesses as well as inventory accountability will be discussed further in this paper. Smaller company’s compared to say the larger scaled one would have the most problem with applying or using some of these techniques as well as differences between the nonprofit versus profit organizations. Reasons being managers need to know the costs of their budget by having a cost analysis and budgeting report prepared. Accrual accounting is measured by the performance as well as the position of a company in acknowledging the economic events of how cash transactions occur, and depreciation has to be estimated while inventory can be determined simply by doing an adjusting entry for the cost of goods sold. Economic events are matching revenues to the expenses to which a transaction occurs when payment...
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...Accounting Principles Relating to Healthcare Christine Watts HCS/571 May 26, 2014 David Catoe Accounting Principles Accounting is a numbers related profession. Staying solvent financially are what business leaders and owners strive for to stay competitive and to keep their doors open. Healthcare institutions are in the business to care for people, but at the same time they must make money in order to achieve this goal. Whether they are for profit or not for profit, accountants and financial managers make decisions every day to keep budgets in line, keep people working, and patients happy. No matter what position one holds in a company, it is important to have a basic understanding of general accounting principles and how they apply to healthcare. The first principle is the accounting entity. The entity is an organization in which the financial information is recorded and reported (Cleverly, Song, & Cleverly, 2011). This must be clearly defined so that the financial reports give a clear picture of the finances for that specific organization. The accounting entity is different from the legal entity so if the organization is a subsidiary or a sole proprietorship, the financial picture must be for the defined organization so that the information is useful and not misleading. Health care organizations that have ownership of many different entities, must keep them separate so that each organization has a clear defined picture of its own financial information...
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...Instructions Categorize the accounting tasks performed by Urlacher as relating to either the identification (I), recording (R), or communication (C) aspects of accounting. E1-1 Urlacher Company performs the following accounting tasks during the year. ___C Analyzing and interpreting information. ___R_ Classifying economic events. ___C_ Explaining uses, meaning, and limitations of data. ___R_ Keeping a systematic chronological diary of events. __ R__Measuring events in dollars and cents. ___C_ Preparing accounting reports. __ C_ Reporting information in a standard format. ___I__Selecting economic activities relevant to the company. __ R__Summarizing economic events. Instructions Classify each item as an asset, liability, or stockholders’ equity. E1-5 Meredith Cleaners has the following balance sheet items. Accounts payable Accounts receivable Cash Notes payable Cleaning equipment Salaries payable Cleaning supplies Common stock ASSETS LIABILITY STOCKHOLERS’ EQUIT Accounts receivable Accounts payable Common Stock Cash Notes payable Cleaning equipment Salaries payable Cleaning Supplies Instructions After analyzing the data, prepare an income statement and a retained earnings statement for the year ending December 31, 2008. E1-12 The following information relates to Linda Stanley Co. for the year 2008. Retained earnings, January 1, 2008 $ 48,000 Advertising expense $ 1,800 Dividends during 2008...
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...The current set of principles that accountants use rests upon some underlying assumptions. The basic assumptions and principles presented on the next several pages are considered GAAP and apply to most financial statements. In addition to these concepts, there are other, more technical standards accountants must follow when preparing financial statements. Some of these are discussed later in this book, but other are left for more advanced study. Economic entity assumption. Financial records must be separately maintained for each economic entity. Economic entities include businesses, governments, school districts, churches, and other social organizations. Although accounting information from many different entities may be combined for financial reporting purposes, every economic event must be associated with and recorded by a specific entity. In addition, business records must not include the personal assets or liabilities of the owners. Monetary unit assumption. An economic entity's accounting records include only quantifiable transactions. Certain economic events that affect a company, such as hiring a new chief executive officer or introducing a new product, cannot be easily quantified in monetary units and, therefore, do not appear in the company's accounting records. Furthermore, accounting records must be recorded using a stable currency. Businesses in the United States usually use U.S. dollars for this purpose. Revenue recognition principle. Revenue is earned and...
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...Principles of Accounting Good accounting practices are vital in running any business operation fluidly. In business, accounting is used to make critical decisions. It is the numbers. It is always about the numbers, and good, strong accounting skills are needed to understand and interpret these numbers. The purpose of this paper is to define the purpose of accounting, identify the four basic financial statements, and explain how they are interrelated and whom they are useful to. Accounting “Accounting is an information system that identifies, records, and communicates the economic events of an organization to interested users” (Weygandt, Kimmel, & Kieso, 2008, p. 4). Economic events are accounting transactions that a company identifies and records to communicate this information to interested parties. For example, Apple computers first identifies that a computer sale is an economic event relevant to its company. An example of an economic event to Apple computers is selling an Apple iPod. When this transaction takes place, it is recorded in a systematic manner to create a chronological diary of events (Weygandt, Kimmel, & Kieso, 2008, p. 21). Four Financial Statements There are four different and interrelated basic financial statements that companies prepare from summarized accounting data. The first statement is the income statement. The income statement presents the net income (when revenues exceed expenses) or net loss (when expenses exceed revenues) of a company based...
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...Contents Contents 1 Abstract 2 Introduction to Accounting 2 CSL Ltd 2 Accounting Concepts and Conventions 2 Realization Concept 3 Going Concern Principle 3 Historical Cost Principle 3 Materiality 4 Dual Aspect Concept 4 Business Entity Concept 5 Consistency and Comparability 5 Conclusion on Accounting Concepts 6 Reference 6 Abstract Nowadays, Accounting is much more important for people from inside or outside company to make financial decisions. Financial information can be of great help in analyzing a company’s past performance and its current financial position and provide some insight into its future prospects. This assignment focuses on the discussion of basic accounting concepts. CSL Ltd is selected as an example...
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...Generally Accepted Accounting Principles and Healthcare University of Phoenix Online December 23, 2013 Generally Accepted Accounting Principles and Healthcare Accounting measures allow the public, those granting credit and investors, the opportunity to review a business’s financial performance through the review of financial statements. The financial market is grounded on the truthfulness of financial statements that allow investors to estimate the value of securities. The usage of generally accepted accounting principles (GAAP) is part of an organized and regulated method for financially educated professionals to create financial statements. GAAP outlines in detail the components necessary for large and small businesses to disclose their financial performance as accurate as possible to avoid bias (Federal Accounting Standards Advisory Board, 2013). GAAP addresses the wide range of accounting practices down to the small and specialized business. Accounting Principles “Generally accepted accounting principles (GAAP) are rules established by the Federal Accounting Standards Advisory Board (FASAB)” (Finkler, Kovner, & Jones, 2007, p.104). The development of accounting principles became emergently necessary because of the trend of major financial disasters. The stock market crash and demise of Enron were a result of faulty and deceptive accounting practices which failed to disclose the true state of the organizations. Events like these precipitated the need for GAAP...
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...For my role as a staff accountant, I was assigned to research the appropriate accounting for revenue treatment of construction contracts for a client, LabCo. In specific, I was assigned to oversee LabCos’ contract involving a six-axis laser-cutting machine with Halibut Co. After researching and developing a theory based on the Financial Accounting Standards Boards’ Codification, I have concluded that LabCos’ treatment of revenue was reasonable; however, they should have changed revenue recognition principles sooner. In this situation, there are three possible ways they can handle changing their accounting method: Retrospective Application, Change in Accounting Estimate Method, or Change in Estimate Affected by Accounting Principle. The revenue treatment principle for a construction type principle states, “In accounting for contracts, the basic accounting policy decision is the choice between two generally accepted methods: the percentage-of-completion method including units of delivery and the completed-contract method. The determination of which of the two methods is preferable is based on a careful evaluation of circumstances because the two methods should not be acceptable alternatives for the same circumstances (ASC 605-35-25-1).” LabCo agreed to build a six-axis laser-cutting machine for Halibut. The contract entered into was a fixed price contract. A fixed price contract is, “An agreement to perform all acts under the contract for a stated price” (ASC 605-35-15-4)...
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...There are certain accounting reporting criteria contained in the International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (U.S. GAAP) that have been used to standardize the way companies book their assets, expenses and liabilities. Open the possibility to report the assets at current market value can generate risks in terms of control; this is because market price can be adjusted due to managers’ and accountant point of view so in the end this can be used as a path to incur in fraud. Accounting principles has to give a unique way to book the assets, expenses and liabilities and should close as much as possible the opportunity for interpretation. During the last nine years, different companies have been involved into highly publicized fraud scandals, as a result of having “improperly accounted billion of expenses, assets and liabilities”. These had created a negative impact on public views regarding the accounting community. Many people began arguing for stricter regulations in the accounting industry. To have and use global high quality accounting standards in order to achieve greater transparency, clarity, consistency and comparability of the financial reports is not only necessary, but also has become a social request. I consider that for purposes of consistency, reliability and comparability, companies should not have the freedom to report their assets at current market price or cost, this alternative reporting methodology would make...
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...Week 5 Final Spencer Beymer Ashford University Principles of Accounting 205 Emmett Denham August 9, 2015 Week 5 Final Company Overview Sam Walton opened the first Walmart store on July 2, 1962 in Rogers, Arkansas. The first Walmart store was created as a small discount retailer, but began to rise quickly. There were 24 stores with $12.7 million dollars in sales by in 1967. Walmart officially became a corporation in 1969. By 1970s Walmart became a publicly traded company, and was bought at $16.50 per share in the New York Stock Exchange. In the 1980s the first Walmart Supercenter opened and they hit their first $1 billion in annual sales, which were faster than any other competitor. Walmart became known as ‘America’s Top Retailer’ in the 90’s. In the ‘New Millennium’ Walmart topped the Fortune 500 ranking of America's largest companies. Today the company employs 2.2 million associates worldwide and serves more than 200 million customers each week at more than 11,000 stores in 27 countries ("History Timeline," 2015, p. 1). Walmart sells large assortments of merchandise such as merchandise to consumers such as, food, electronics, house ware, health and beauty, jewelry automotive, hardware and miscellaneous other conventional products. Having a lot of stores with such a wide variety of merchandise allows Walmart to be such a well-known name throughout the world. Walmarts main competitors are companies such as Big Lots, Target, Kroger, Olies, Sears, and Amazon. Horizontal...
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...Accounting Principles Related to Nursing Olasumbo Dada University of Phoenix Abstract The continuing rise in technological advancement in the health care industry has led to a rising cost in the industry. Hospitals and other healthcare sectors face a major challenge in managing the massive change in respect to cost and still being able to provide excellent care for their patients considering the expansion that the industry is continuously facing. As a result, the financial accounting aspect of the healthcare industry needs more attention than ever. The advancement in the financial aspect of healthcare requires more people to assume administrative duties. Cleverly, Song, & Cleverly (2011). For healthcare organizations to function properly in the increasing change in cost, revenue, and reimbursement by third parties, certain principles are necessary to be in place. According to Voelm, K. (2013), some generally accepted financial principles in healthcare are: Accounting Entity, money measurement, duality, cost valuation, stable monetary unit. Accounting principles related to Nursing Accounting Entity: Accounting entity is the part of a business that specializes in economic activities. Once an entity is established, accountants are able to determine the cash flows and transactions that will impact the entity's financial statements. Accountants in organizations focus on accounting entities and report transactions that are related to that entity. Accounting entities control...
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...The primary objectives of accounting is to keep track of transactions and recording revenue and expenses are important business processes often assigned to an accounting department or a financial manager. Accounting is a business discipline that allows companies to record analyze and retrieve critical financial information that can be used to determine a company's financial status and provide reports and insights needed to make sound financial decisions. There are four basic terms in accounting they are assets, liability, revenue , and expenses. Assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset. Simply stated, assets represent ownership of value that can be converted into cash although cash itself is also considered an asset. Liablilty is An obligation that legally binds an individual or company to settle a debt. When one is liable for a debt, they are responsible for paying the debt . Revenue is the income that a company receives from its normal business activities, usually from the sale of goods and services to customers. Then finally, expenses is an outflow of cash or other valuable assets from a person or company to another person or company. This outflow of cash is generally one side of a trade for products or services that have equal or better current or future value to the buyer than to the seller. An expense is an event in...
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...assumptions of accounting Going concern assumption proposes that the financial statements are normally prepared on the assumption that an entity will continue its operations in the foreseeable future. If this is not applicable the financial statements needs to be revised and assets and liabilities should be measured at their current net realizable value. Additional disclosures about the basis of preparation must be made in the financial statements. Accounting entity or business entity assumption states that the business is considered separate and distinct from its owners. Accounts are kept for entities, as distinguished from the persons associated with these entities. For example the purchase of an asset for owner’s personal use should not be recorded in financial statements. This ensures transparency in ascertaining the return on capital employed. Money Measurement specifies that only items which are capable of being measured in monetary terms should be recognized in the financial statements. For example even though a loyal workforce may be of benefit to a business this value cannot be measured in monetary terms and is therefore not included on the balance sheet. It also assumes stability in the time value of money. E.g. $1 a year from now will buy the same amount as it does today. Accounting period assumption dictates that the financial statements should be prepared and reported for a specified time period (generally a year). At the end of each accounting period an income...
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...E2-9 (Accounting Principles—Comprehensive) Presented below are a number of business transactions that occurred during the current year for Gonzales, Inc. Instructions In each of the situations, discuss the appropriateness of the journal entries in terms of generally accepted accounting principles. (a) The president of Gonzales, Inc. used his expense account to purchase a new Suburban solely for personal use. The following journal entry was made. Miscellaneous Expense 29,000 Cash 29,000 (b) Merchandise inventory that cost $620,000 is reported on the balance sheet at $690,000, the expected selling price less estimated selling costs. The following entry was made to record this increase in value. Inventory 70,000 Sales Revenue 70,000 (c) The company is being sued for $500,000 by a customer who claims damages for personal injury apparently caused by a defective product. Company attorneys feel extremely confident that the company will have no liability for damages resulting from the situation. Nevertheless, the company decides to make the following entry. Loss from Lawsuit 500,000 Liability for Lawsuit 500,000 (d) Because the general level of prices increased during the current year, Gonzales, Inc. determined that there was a $16,000 understatement of depreciation expense on its equipment and decided to record it in its accounts. The following entry was made. Depreciation Expense 16,000 Accumulated Depreciation —Equipment 16,000 (e) Gonzales, Inc. has been concerned about whether...
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...Generally Accepted Accounting Principles Tonya Krell Phoenix Generally Accepted Accounting Principles Accounting standards that record and report financial information in a consistent manner is known as Generally Accepted Accounting Principles (GAAP). There are four primary financial statements in which GAAP is used to guide the rules and requirements. The financial statements include a balance sheet, statement of operations, statement of cash flow, and statement of changes in net assets (Cleverley, Song, & Cleverley, 2011). Professionals, to prepare financial documents based on a common standard, implement the principle. GAAP is beneficial to companies as it alleviates the difficulties of comparing a company’s financial statements, establishes creditworthiness of a company, and provides financial strength ("How does GAAP aid in health care," n.d.) GAAP is reinforced by eight accounting concepts. The concepts are as follows: (a) Entity concept, (b) Going-concern concept, (c) Matching principle, (d) Cost principle, (e) objective evidence, (f) Materiality, (g) Consistency, and (h) Full disclosure (Finkler, Jones, & Kovner, 2012). This paper provides a description of each concept and how the concept relates to health care. In accounting there must be an entity that is used to prepare financial statements such as balance sheets for the health care organization. This can include the organization as a whole but typically is broken down into units or departments. Identifying...
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