INTRODUCTION TO ACCOUNTING AND FINANCE PROCESS
Every organization needs managers with a working knowledge about the people and the process dedicated to the production of corporate goods and services. Regardless of the level, each employee is engaged to make the company successful. Primary among all the departments are the dedicated specialists taking care of business in terms of finance and accounting. However important the non-financial managerial knowledge and skills may be, managers are more effective when they understand the accounting and finance principles and practices that underlie every business. Business decisions in any department have financial implications for every department. It is therefore crucial for all managers to understand how their budgets advance or impair the mutual benefit of the business as a whole, not just their individual departments. At the beginning and foundation of every successful business is a strategy nurtured and sustained by the basics of sound and solid finance and accounting.
A solid grasp of the definitions and structure of the balance sheet and the income statement is key for managers to effectively work with the accounting department. This facilitates a deeper understanding of how to analyze financial statements and how to identify the important factors that comprise a sound and effective budget decision. Among the many terms of finance and accounting, the following are of immediate attention: generally accepted accounting principles, double entry, historical cost, accrual basis, cash basis, current assets & liabilities, and non-current assets.
The first term, Generally Accepted Accounting Principles (GAAP) refers to the rules and procedures that constitute generally accepted accounting practice. The highest level of these procedures is set by the Financial Accounting Standard Board (FASB). GAAP starts with a conceptual framework that anchors financial reports to a set of principles, such as materiality (the...