P1 Describe the purpose of accounting for an organisation
What is accounting
Accounting is a recording, reporting, and analysis of financial transactions of the business. The person which is in charge or accounting is known as an accountant, this person is specifically in charge to follow rules and regulations, such as the generally accepted accounting principle. Accounting lets businesses to analyze the financial performance of the business, and look for statics such as net profit.
The accounting process
The accounting process is a chain of activities that begins with an operation and ends with the closing of the books. Because this procedure is repeated every reporting phase, it is referred to as the accounting
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There are two major types of adjusting entries which are:
Accruals
Accruals objects are individuals for which the firm has been realizing revenue or expense without yet observing an actual transaction that would consequence in a journal entry.
Some accrued objects for which adjusting entries may be made include:
• Salaries
• Past-due expenses
• Income tax expense
• Interest income
• Unbilled revenue
Deferrals
Deferred things are those for which the firm has recorded the transaction as a journal entry, but has not yet realized the revenue or expense associated with that journal entry. In previous expression, the acknowledgment of deferred items is postponed until a later accounting period.
9. Position adjusting entries to the ledger accounts
10. Arrange the adjusted trail balance. This stage is similar to the planning of the unadjusted trial balance, but this time the adjusting entries are included. Correct any errors that may be found.
11. Prepare the financial statements.
• Trading, profit and loss account: prepared from the revenue, expenses, gains, and losses.
• Balance sheet: prepared from the assets, liabilities, and equity accounts.
• Statement of reserved earnings: prepared from net income and dividend information.
• Cash flow statement: resulting from the other financial statements using either the direct or indirect method.
12. Prepare closing journal entries that near temporary accounts
In accrual accounting, an expense is recognized when the business is obligated to pay it. As goods or services are invoiced, the invoices are posted and counted as assets. Expenses are also posted at the time they are incurred. Accrual accounting is used at most mid-level and large businesses and provides a more accurate picture of the company’s current condition, it is however more expensive to implement. This type of accounting is required by GAAP. Although this type of accounting is more complex, it allows one to track receivables and payables, and match revenues to expenses, which gives more meaning to financial reports.
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
Accounting is a product of many estimates and judgments. It is essentially a rear-view mirror, looking back at what has happened. To add to the problem the view changes with each new accounting period.
Accounting is a business discipline that allows companies to record, analyze, and retrieve critical financial information that can be used to determine a company 's financial status. Its purpose is to help people understand what is going on financially within an organization provide reports and insights needed to make sound financial decisions.
Identify each of these transactions as a deferred revenue, deferred expense, accrued revenue, or accrued expense.
The seventh step is an adjusted trial balance is prepared. This is an additional checks and balances step in the cycle This one is when after you completed all the corrections with the adjustments you go back now and add up all your debits and credits to make sure they are equal. If they are not equal it means a error was made someplace in the process and needs to originate.
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. These activities include 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
(TCO 3) Adjusting Entries are required at the end of the period to ensure that accrual accounting principles are applied. At the beginning of the month $1,350 of office supplies were purchased. There was not a beginning balance and the one purchase was the only one for the month. At the end of the month $500 of supplies remained. Develop the adjusting entry. (1) Name the accounts impacted and how using the format account name/debit or credit/dollar amount (10 points) and (2) explain how the Accounting Equation is impacted. (10 points) (Points : 20)
Assess the degree to which the firm’s accounting reflects the underlying business reality. Identify accounting distortions and evaluate their impact on profits and the sustainability of profits.
Accruals. This occurs when sales and expenses are recorded when they incur, not when they are paid out or the payment is received. In other words, the record should be made immediately no matter if the payment was received or not, paid out or not yet. Accruals can be called unpaid bills, sales on credit and other expenses over due.
Accounting transactions are professional occasion that has either a positive or negative budgetary impact on the financial statements. One impact of transactions in a financial statement will increase or decrease the accounts contingent on the transaction that has taken place. The history of revenue that has come or gone from the business will be shown on both financial statements and accounting transactions. Many businesses make several transactions daily. Errors can have a negative impact on financial statements, because the facts come from the accounting transactions
Accrual accounting shows outcome of transactions and other events such as assets and liabilities of entity 's in such a periods in which effects occur even if cash is paid or received in a different time.
1. A brief history of the two organisations, and their objectives, in as far as they
All businesses has a obligated task to prepare financial statements that shows the performance of the business at the end of a accounting period. Accounting standards regulation is important because it helps to ensure that companies are transparent in preparation of financial statements which reflects the true results of the company’s outcome. If there are no regulations for preparing financial statements, anyone can prepare and present the financial statements to the public without considering credibility.
Accounting can be defined in a number of ways, but I chose the book definition, which is; Accounting is an information system that provides reports to stakeholders about the economic activities and condition of business. The person in charge of accounting is called the accountant. The accountant is typically required to follow a set of rules and regulations. These rules and regulations are called the General Accepted Accounting Principles. Throughout these next few paragraphs, I will be giving you the history and evolution of accounting, and I will be explaining who the stakeholders are and what type of information they require, and I will be explaining the role of accounting in business. There will be many examples and type of business