Explaining Basic Accounting Concepts and Business Structures

Accounting is the methodical and full recording of financial transactions relating to a business, and it also denotes to the procedure of briefing, examining and evaluating these transactions to cross checking agencies and tax collection agencies. Accounting is one of the key purposes for nearly any company. It may be done by an auditor and accountant at small businesses or by substantial finance subdivisions with lots of employee’s at

Financial accounting is the branch of accounting that organizes accounting information for presentation to interested parties outside of the organization. The primary financial

The act requires management to disclose all material information or changes within their accounting processes. By requiring senior management to review the reports they are held accountable for the financial accounting of the firm, and procedures to prevent employees and other members within an organization from committing fraud or theft and management is legally responsible if material misstatements have been made. By making management accountable then they are less likely to commit fraud if faced with jail time. Management and stockholders frequently have different goals. Management often wishes to expand and use the company’s assets in different ways than a stockholder. Management’s accountability of the financial reports often helps encourage management to use company assets in appropriate ways. Disclosures were also a reduction in risk of fraud because all material information must be disclosed. By requiring this disclosure if a company’s net income increased this year due to a

 Financial accounting is an information-processing system that generates general-purpose reports of financial operations (income statement and statement of cash flows) and financial position (balance sheet) for an organization. It is used by decision makers inside and outside the firm, such as security investors, analysts, and lenders. Adding to this external orientation are external financial reporting requirements determined by law and generally accepted accounting principles.

As stated in the AASB Framework, financial statements play an utmost important role to a variety of users, which mainly consist of the investors, employees, lenders, suppliers and other trade creditors, customers, governments and their agencies, as well as the public, in making vital financial decisions. For accounting information to be ‘decision useful' to this groups of people, the financial information

Accounting is the heart and soul of executing a successful business. Accounting is used to provide record for all items that are paid and received for a business over any period of time. Within the purpose of accounting lies the need to provide continuity and sustainability within a business, without it a business will not thrive. The information obtained is kept on record, in order to give insight to upper management on data concerning the daily revenue and expenses of that business. This data is needed to not only inform the employees of the business, but also the investing parties of that business as well. Success in business is equated to being accountable of all aspects of revenue and expenses. To

Then, we have internal users of accounting information, such as employees and the various types of managers (i.e., purchasing managers and marketing managers). Accurate accounting is extremely crucial to these individuals who make important financial and business decisions within an organization that directly affect the business itself (Wild, Larson & Chiapetta, 2007, p. 6). A company, "aims to sell goods and services to customers at prices that will provide an adequate return to its owners" (Kanter & Pressley, n.d., Slide 1-13). A business must maintain an adequate level of profitability and liquidity to continue operating (Kanter & Pressley, n.d., Slide 1-14). However, without accounting information, this is not possible. A firm's management needs this information to properly conduct daily activities within the business, such as finance the company, invest its resources, produce its goods and/or services, market those goods and/or services, and manage the employees (Kanter & Pressley, n.d., Slide 1-29). However, accounting information is just as critical for internal users when they make decisions that will affect the

The annual report contains the information above and is very important to the business, and can be used for many different reasons. The owners can use the information to decide whether or not they should continue to operate. The information on the total assets and the amount of the accounts payable can benefit potential investors because it shows them strong the company is financially, by stating what the company owns and how much it owes. The finance department can use the information above to make reasonable “decision about debt and equity financing and how to distribute in dividends” (Kimmel, Weygandt, & Kieso, 2011, p. 41).

There are certain regulations that come along with financial reporting. One of the guidelines used by Americans is the Generally Accepted Accounting Principles (GAAP), which are made by the Financial Accounting Standards Board (FASB). According to authors Harrison, Horngren, and Thomas, accounting is used to reveal information about a company to its investors, lenders, and creditors. They also convey that the information

The definition of accounting according to Webster 's dictionary is "the system of recording and summarizing business and financial transactions and analyzing, verifying, and reporting the results." The purpose of accounting is to provide financial and business information to possible investors,

Accounting is the study of how businesses track their income and assets over time. Accountants engage in a wide variety of activities besides preparing financial statements and recording business transactions, including computing costs and efficiency gains from new technologies, participating in strategies for mergers and acquisitions, quality management, developing and using information systems to track financial performance, tax strategy, and health care benefits management. They perform these vital functions by offering an increasingly wide array of business and accounting services to their clients, in order to provide information to them.

Financial accounting is a crucial process for any successful business. Atrill and McLaney, 2013 define financial accounting as: “the identification, measurement and communication of accounting information for external users (those users other than the managers of the business).”

Accounting helps to provide users with factual and interpretive information about transactions and other events which are useful for predicting, comparing and evaluation the enterprise’s earning power.

The General purpose of a financial report is to meet the needs of a specific external parties in accordance with general purpose financial report. In order for a company to achieve this they must first comply with certain accounting standards and NZ framework. Examples of accounting standards such as being “true and fair” which means that the financial statements of company has to be free from misstatements and faithfully represents the financial performance and position of a company,( True and Fair, 2014). The true and fair value of financial statements is widely recognized as one of the best responsibilities of the management of a companies in the corporate law of other countries including NZ. There are a different entity or business that audit company’s financial statements and it’s up to the auditors to decide whether a

Financial Statements are used to evaluate the company’s performance. This information is also distributed to shareholders and investors. These financial statements must be accurately prepared according to the GAAP (Generally Accepted Accounting Principles) rules and regulations. A third party auditor is used in order to check the ‘…annual financial statements, to ensure that the annual financial statements are reliable and prepared according to GAAP (Sullivan, 2011).’ There are four types of financial statements: Stockholders’ Equity, Balance Sheet, Income Statement and Statement of Cash Flows.