The financial side of accounting is used to represent the company’s current standing based on the past profits, net income, bad debts, and current ratio of assets to liabilities. The financial accounting represents a specific period of time, called the fiscal year, for the public to analyze the operating performance of the company. Financial accounting uses more concrete methods of operating by using the Generally Accepted Accounting Principles (GAAP). This set of principles is an international standard that all financial
General and Commercial Basis Accounting Principles Generally accepted accounting principles (GAAP) state the standard framework of guidelines for financial accounting used in any given jurisdiction; commonly known as standard accounting practice or accounting standards. These contain the rules, standards, and conventions that accountants practice in recording, summarizing and in the preparation of financial statements. Hubpages.com discusses commercial accounting, also known as profit accounting, defining that it performs mainly by profit and loss. The reporting for a profit organization is directed to the investors. ("The Principles of Commercial Accounting and Fund Accounting", 2011).
Managerial Decision-making using Financial Ratios MGMT640 Managerial Decision-making using Financial Ratios Abstract: Background: Financial statements allow stockholders and management to determine the financial health of a business. Using ratio analysis businesses can gain a snapshot of their durability compared to other companies within their industry. Managerial decision-making skills are a direct correlation on the financial wealth of a business, and can identify strengths and weakness within an organization. Results: Quantitative results are shown though using financial ratios and financial statements. The financial ratios can be divided between five core categories.
The importance of an income statement therefore is to help in making an analysis of how the different decisions the business makes affect its level of profitability. The Cash flow Statement. It is a record of the amount of cash flowing in and out of a business over a given time period being examined. The statement is important to a business since it shows the ease by which a business can create an adequate level of liquidity or cash to finance its running operations. It also helps determine the amount of money available at the end of the business’s financial period which may be used for a subsequent period’s investment.
SHOULD ETHICS BE TAUGHT IN ACCOUNTING SUBJECT? Nowadays ethics should be taught in the accounting field. This is because accounting profession relies on an accountant. Accountants are people who have a wide range of behavior. Attitude and behavior of each person is different, so accounting ethics need assistance.
Accrual and Cash Basis Accounting Commercial accounting and generally accepted accounting principles, generally prescribe the accrual basis of accounting over the cash basis. Describe both bases of accounting and explain the differences. Cash basis is used mostly by small businesses where owners and creditors want a simple way to understand the financial statements. Cash basis is used when a company or creditors does not worry about the accuracy of the statements but just want to understand if there is profit or loss in the company. Revenues are recorded when cash is received and expenses are recorded when cash is payment.
Discuss and analyze the difference between managerial and financial accounting. Pay particular attention to: • How is managerial accounting different from financial accounting? • Comment on the different needs and use of financial information for internal purposes. • The managerial accounting profession and its role in today’s business environment. How has it changed over time?
This is not because I think your knowledge in this area is in any way faulty but I feel it necessary to be thorough. The main goal of financial accounting is to prepare reports for outside sources such as stockholders, investors, or for tax purposes (Financial Accounting. (n.d.). There are a few different financial accounting systems but the most common are Accrual and Cash methods (Financial Accounting. (n.d.).
The existence assertion is to make sure that the client and accounts exist, the completeness is to make sure that all of the balances are recorded, and the valuation is to make sure that the balances are recorded at the correct amount. It is important that the auditor obtains a confirmation from a third party for the information in accounts receivables. After communicating and obtaining the information, the auditor is to evaluate the information (SAS No. 67, AU Section 330.11). The audit objectives auditors use to perform year-end sales cutoff tests are to determine if the information they obtained by the confirmation reduces the audit risk level.
Basis of Preparation The financial statements are prepared in accordance with the applicable law and under the convention of Historical cost. The preparation is governed by the Generally Accepted Accounting Principles (GAAP) rules and the regulations from the Association of Chartered Certified Accountants and Chartered Institute of Management Accountants (CIMA) 3. Basis of Consolidation The following financial statements are those of the company and its subsidiaries up to the end of the 2011 financial year. Results of subsidiaries disposed or acquired in the course of the year are included in the income statement up to the disposal date or from the acquisition date. Joint ventures are the undertakings that the company has a long term interest and shares its control jointly with another entity (Kones 2009, 45).