Financial Accounting Essay

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University of Phoenix ACC/537 Financial Accounting Financial Accounting The purpose of accounting is providing all information that organizations needs to make good economic decisions. Financial accounting means the process to prepare financial report in organizations for use of internal and external parties such as investor, creditor, and tax agencies. The principal means that companies communicates its financial information is by financial statements. Financial statements include the income statement, the stockholder’s equity, the balance sheet, and the statement of cash flow. To prepare the financial statements reports fairly, accuracy and consistently, these are prepared according to accounting standards. The common standards are named generally accepted accounting principles (GAAP). The accounting standards, better known as generally accepted accounting principles (GAAP), mean the authoritative accounting rules established to prepare the financial statement to public and private companies. The standard categorizes the major sources of GAAP are: Financial Accounting Standard Board (FASB) standards, interpretations, and staff positions; Accounting Principle Board (APB) opinions; and American Institute of Certified Public Accountants (AICPA) accounting research bulletins. According to the book Intermediate Accounting, FASB is working in the standard “The Hierarchy of GAAP” that describes the meaning of them and identifies the sources of accounting principles for selecting the principles in the preparations of financial statement. This statement No. 168, the Accounting Standard Codification (ASC) replaces FASB No. 162. After June 30, 2009 ASC become the authoritative source of U.S. GAAP for public and private companies. In addition this codification was issued by the Securities and Exchange Commissions (SEC) and is focusing in the changes when individuals

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