Smith Company: Income Statement And Profitabilty

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

Throughout this task I will do my best to explain how firms determined to maximize profit do just that. Specifically I will delineate how such firms choose the optimum level of production or output for the goods they produce and how they behave with respect to various elevations of marginal revenue. In my attempt it will be appropriate for me to clarify the definitions of various economic terms in order to assure a proper understanding of my thoughts on this topic, I will provide these definitions throughout.

The purpose of this paper is to define accounting, and identify the four basic financial statements. The paper also explains how the different financial statements are interrelated to each other and why they are useful to managers, investors, creditors, and employees.

The purpose of accounting is to record the financial information, such as transactions and performance, related to a business. The accounting profession has been in existence for as long as business transactions have occurred. It wasn’t until 1494, however, when Luca Pacioli, a Venetian merchant, wrote Summa de Arithmetica, Geometrio, Proportioni et Proportionalita. His writings described a two-entry system of debits and credits, which became the basis for modern accounting systems. Three centuries later, with the emergence of the Industrial Revolution and the development of corporations, the profession of being an accountant became a necessity to keep track of the rising costs and cash flows. As a result, the American Association of Public

Accounting aspects have been several in amounts. They lay out ground rules for succeeding in

Within any industry the fiscal or economic goals are to increase revenue; determine the fixed and variable costs for the business; and determine how to maximize profit. In order to reach those goals an organization needs to establish the pricing structure, product differentiation, and how to minimize the costs for the product. In this proposal will layout the strategies to reach those goals in order to make a more economic successful organization.

Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2012). Accounting Principles (10th ed.). Hoboken, NJ: John Wiley & sons.

For as long as businesses have existed, so has accounting. With time, it has become more complicated and detailed, but it is still a process of keeping financial accounts in order. Through accounting, or financial reporting, a system is set up to keep track of, maintain and audit the financial proceedings. Because accounting and financial reporting of a business is so important for its accuracy and in general, a lot of ethical, technological and legal concerns are involved. In this paper, we will look identify and explore the concerns of each of these.

When the client had shown interest in the $35,000 worth of products, the original transaction would have been a debit to revenues and a credit to accounts payable. To adjust this transaction, since the client has not made a commitment, revenues would decrease the $35,000 as well as accounts payable being decreased $35,000. For the income statement adjustment, the revenues would be $35,000 less, resulting in $370,500 in revenues instead of the $406,000.

When talking about accounting, the first thing we should know is the history of its development. Traditionally, the development is from inductive to deductive. Inductive theory assume what is done by the majority is the most appropriate practice. However, It did not seek to evaluate the logic or merit of

An income statement provides a historical record of business transactions over 1 financial year. The PURPOSE of an income statement is to identify the sustainability of the business and also allowed Smiths Ltd to see how much profit and loss they have made and allows them to change their budget accordingly. Its PURPOSE is to also provide vital information which can be used to evaluate financial performance of Smiths Ltd. Its PURPOSE is to also provide analysts and investors with information such as sales revenue and expenses from business operations to see if they should invest money in Smiths Ltd or not. It also provided as summary of vital components so that they can be compared to other similar businesses and

Matching or accrual concept requires the income and expenses of a business company to be recorded in the period of when they have been earned or spent. Accountants have to make sure that prepayments of expenses are recorded separately from accrued expenses, when financial statements have been prepared.

The matching principle in the words of Nikolai, Bazley and Jones (2009) "states that to determine the income of a company for an accounting period, the company computes the total expenses involved in obtaining the revenues of the period and relates these total expenses to (matches them against) the total revenues recorded in the period." In that regard, this principle recommends that revenues and expenses (associated with the said revenue) be recognized in the same accounting period. For this reason, the relevance of this concept in the accrual basis of accounting cannot be overstated. In the section below, I explain the importance of this concept.

Revenue recognition is a difficult matter in accounting. The company’s results differ depending of the method used to recognized earnings. This is a complex situation since business activities are broad and intricate. Therefore, policies and regulations are imperative to reduce manipulation of financial statements.

There are many important aspects of accounting. The generally accepted accounting principles are accounting rules set out for companies to follow to ensure all companies are on the same page business wise. Qualities of accounting are important in the decision making process of accounting. Accrual and cash bias methods are different ways to count revenue and will be discussed. The final area of review is the different types of business structures.