Accounting - It is the process of identifying, recording and summarizing economic data about the organization and reporting it to decision makers.
Financial Accounting - It serves external decision makers such as Stockholders, suppliers, banks, and government agencies
Management Accounting – It serves internal decision makers, such as top executives, department heads, college deans, and other people at management levels within the organization.
Questions on Financial situation about the company:
A) What is the financial picture of the organization on a given day?
B) How well did the company do during a given time period.
Three statements that are very important for decision makers that are prepared by accountant are:
a) Balance Sheet
b) Income Statement
c) Statement of Cash Flows.
Annual Report – A report prepared by corporate management to be distributed among current investors and future prospects. It contains overview of company along with future goals. It also contains all the information about financial situation of the company.
Form 10K – A document submitted with SEC that contains the financial statements of the corporation.
Balance Sheet = Statement of Financial Position = Financial Situation of a company at a particular instant in time. Balance sheet MUST balance both sides (Assets and Liabilities + Owner Equity). If the balance sheet doesn’t match on both sides, there is a mistake.
Balance Sheet Equation
Assets = Liabilities + Owner’s Equity
Owner’s Equity (OE) = Assets – Liabilities
Another Version-
Assets = Liabilities + Owner’s Equity
Assets = Liabilities + Paid in Capital + Retained Earnings
Assets = Liabilities + Paid in Capital + Revenues (Total Sales) – Expenses (Total Sacrifices)
Assets - Economic Resources that either help future Cash Inflow (Adding) or help reduce outflow of CASH
Liabilities - Economic Obligations to outsiders or claims against its assets by outsiders.
Paying Dividends is not an Expense since paying dividends it the distribution of wealth to its owners.
Owner’s Equity - Owner’s CLAIM on organization’s assets or total assets less total liabilities. Remember ( OE is the owner’s claim that can be made after deducting all the liabilities from the Company’s Assets.
Notes Payable - Promissory note(s) that are evidence of a debt and state the terms of repayment.
Entity - an organization or part of the organization that stands apart from other organizations and individuals as a separate unit.
Transaction - an economic event that that affects the financial situation of the entity an can be recorded reliably by the accountant.
Long-lived Asset – an asset that the company expects to provide service for more than 1 year.
The Assets consists of: Current assets are highly liquid (cash, receivables, and inventories), Fixed assets can be capital-intensive assets which are permanent, and other assets can be intangible (patents, copyrights, and goodwill).
Financial statement users around the globe use financial statements to evaluate the performance of companies (Fundamentals of Financial Accounting, 2006). In order to locate a company’s reported assets, liabilities, expenses and revenues, statement users rely on four types of financial statements. The four financial statements include: Balance Sheet, Income Statement, Statement of Retained Earnings, and Statement of Cash Flows (Fundamentals of Financial Accounting, 2006, p. 6). Each of these reports provides different information to the financial statement user. The Balance Sheet reports at a point in time: a company’s assets (what it owns), liabilities (what it owes) and stockholder’s equity (what is left over for the owners) (Fundamentals of Financial Accounting, 2006, p.7). The Income Statement shows whether a business made a profit (net income) during a specific period of time (Fundamentals of Financial Accounting, 2006, p. 10). The Statement of Retained Earnings illustrates what portions of the company’s earnings was paid to stockholders and retained by the company for future operations (Fundamentals of Financial Accounting, 2006, p.12). Finally, the Statement of Cash Flows reports summarizes how a business’ “operating, investing, and financial activities caused its cash balance to change over a particular range of time” (Fundamentals of Financial Accounting, 2006, p.13).
Accounting is a system used to provide financial information about a business or person. Accountants prepare and analyze financial records for individuals, companies, governments, or other organizations. Accounting is a basic need for every business, and the term business has been broadened to mean any operation that deals with money. That includes families and corporations, and also schools, theaters, art galleries, charitable organizations, and even some private persons. People sometimes call accounting “the language of business” because accounting data are used to detail firms activities. Accounting tells the history of a business or person in numbers.
• Accounting (financial) statements for a period of several years. The statements include the balance sheet and profit and loss account, in addition, cash flow statement, capital and the annex to the financial balance.
out to stockholders. Within this section of the annual report there is also a company stock performance graph. This shows a
This case assignment will discuss managerial accounting and different income statements a business owner may use internal to the company. Divided into two parts, part one will discuss and analyze the difference between managerial and financial accounting, the needs for financial information used for internal purposes. Additionally, it will focus on the managerial accounting profession and how its roles have changed in today’s business. Expanding on the profession, it will comment on the Certified Management Accountant (CMA) certification and how it differs from the CPA certification. Part two of this assignment
Financial statements are formal records of a business’s financial activities. These statements provide an overview of a business' financial condition in both short and long term.
Accounting is basically a service activity. Its purpose is to provide quantitative information that principally used by the managers, investors, tax authorities, and other decision makers to make the financial decisions within companies, organizations, and public agencies. Accounting is also widely known as the “language of business.” An accountant measures, communicates, and interprets financial activities. They prepare financial statements or reports for individuals, businesses, government agencies, or other non-profit organizations. They use the accounting systems to categorize the expenses and income to the typical groups. They also keep tract of the money received or paid out to see if the transactions are accurate and complete. Accountants are familiar with the computer operation. They use the computer...
Balance sheet: It is often referred to as the statement of financial condition. It is a snapshot of what you have and what you owe at a given point in time. It lists all assets, liabilities and equity or net worth, with their values. The value of the assets must equal the value of the debt and the
purchases goods or services from other companies on credit, a payable is recorded to show that the
Balance sheet-: Balance sheet is a statement at the book value of all of the assets and liabilities of a business or other organization present a particular date such as the end of the financial year. It is known as a balance sheet because it reflection accounting identity the components of the balance sheets. The balance sheet must follow the following formula:
An accountant makes sure that the Nation’s firms are run efficiently, the public records are kept accurately, and that taxes are paid properly and on time (“Accountants and Auditors”). Accounting is the study of how a business tracks their income, assets, expenses, and many other things for a period of time. They also do many other things like quality management, tax strategy, and health care benefits management (“Welcome to Careers in Accounting”). An accountant is crucial to the success of a business, without one the business tends to fail.
Accounting aids the government and organisations in decision making for their financial stability. This numerical data helps solve real life problems and contributes to how the economy and businesses perform.
Accounting is a vital element of business. It records the way a business has grown and, after analyzing figures, suggests the way it should go in the future. Furtunes are gambled on the advice of accountants.
Writing an essay on this topic brings an attention on how accounting helps manager in taking effective business decision. It is very important for any organization to take good business decision as to grow business by minimal cost. So, In order to make good decision People and organization need useful information. There is where Accounting plays a ey role. Accounting provides management with data needed to determine whether a business is at a loss or a profit, how much debtors owe, how much a business owes others, and other financial information. Accounting measures business transactions and such can helps managers in the right direction with solid information. Basically accounting is a tool for management to employ to help make sound business decisions on a timely and effectively manner.