Crucial Components of Financial Accounting Explained

In this essay, I will briefly describe some of the most important components of financial accounting: the accounting cycle, merchandising operations, internal cash and control, receivables, plant assets, natural resources and intangibles. I will summarize their concepts, explain their key applications, and describe their integration of implications in the Accounting Cycle.
The accounting cycle is the process by which companies produce their financial statements for a specific period (Nobles, Mattison, and Matsumura 227). It involves 10 steps with one of them being optional. The most important part of the cycle is the generation of financial statements (income statement, statement of retained earnings, balance sheet, and cash flow statement).

The components of Internal Control consist of: control procedures, risk assessments, information systems, monitoring of controls, and the environment.
Failure to maintain internal control can have devastating effects. For example, Enron company did not properly follow a system of internal controls. As a result, the company collapsed, leaving thousands of employees and investors to suffer the consequences. As a result, the Sarbanes-Oxley Act of 2002 was established. It requires publicly traded companies to disclose internal control reports and imposes stiff penalties for those who do not adhere to it.
Internal control for cash receipts and payments to crucial to a business’ success. Separation of duties is one of the most important components of controlling cash. It makes it difficult for employees to commit fraud because one employee does not hold all of the responsibilities.
Internal control is one of the most important components of successfully operating a business and will continue to be in the future. Companies must be flexible and adjust their plans as