Accounting Essay

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Shawna Elsasser December 10th 2010 University of Phoenix: Bellevue Campus Acc 280/Principles of Accounting SOLOMON TESFAYE When most people hear the term “accounting” they get a scared look on their face and turn the opposite direction. For some reason something as important as financial planning and the banking system makes people want to run for the hills. In all reality according to the American Accounting Association the definition is as follows, “the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information.” In the following paragraphs the reader will find who exactly uses this information and the four basic financial statements. Since the definition is not as clear as we would like it to be or as easy to understand to each and every person it might help to break it down into pieces. The first thing to recognize is that accounting is about providing information to others. The kind of information that is being dealt with is called economic information. This type of information relates for financial activates of an organization or business (Tutor2U, 2010). The information that is collected must be measured and identified. This process is done by double-entry bookkeeping in the way of a “set of accounts.” The end result is known as accounting transactions (Tutor2U, 2010). It is a complex process to do the actual measuring of accounting information. An accountant must make judgments about the value of assets or liabilities owed by a business. Also an accurate measurement of profit and loss by a business must be made in order to come to a conclusion of subjective judgment. The final part of the definition is communicating the information gathered. This can be done in many ways such as management accounting reports or annual reports and accounts. In order to choose which

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