Account_Week_One

Financial Accounting vs. Managerial Accounting Financial accounting reports are prepared for the use of external parties such as shareholders and creditors, whereas managerial accounting reports are prepared for managers inside the organization. Financial accounting is mandatory; that is, it must be done. Various outside parties such as Securities and Exchange Commission (SEC) and the tax authorities require periodic financial statements. Managerial accounting, on the other hand, is not mandatory. How do you think learning accounting would help you in your professional or personal life' In your personal life, accounting gives you financial awareness. Once you are aware of your finances, you can take the steps to organize them. An effective accounting system will allow you to not only budget properly but also to maximize deductions when you file your returns. Is bookkeeping and accounting are same' Book keeping is the recording of financial transactions and events, either manually or electronically. While recordkeeping is essential to data reliability, accounting is this and much more. Accounting includes identifying, measuring, recording and reporting and analyzing economic events and transactions. It involves interpreting information, and designing information systems to provide useful reports that monitor and control an organization's activities. As you have learned in this week’s readings the Accounting Equation is Assets = Liabilities + Owners’ Equity.  Is the accounting equation true in all instances'  Provide sample transactions from your own experiences to demonstrate the validity of the Accounting Equation.     It depends on the situation; I feel that the accounting equation could be true in most instances but not all. Accounting Equation is:  Assets = Liabilities + Owners’ Equity. I invested $5,000.00 of my own money into my Cleaning Service. I received $3,000.00 from other investors. The equation would look like this: Assets ($8,000.00) = Liabilities ($3,000.00) + Owner’s Equity ($11,000.00). Reference Walther. (2012). Principles of Accounting: Volume I (1st ed.). San Diego, CA: Bridgepoint Education, Inc. How does an accounting system operate' Your accounting system provides an accurate picture of your business and how it is doing. What is a General Ledger' A General Ledger is a primary accounting record by a business to keep track of all the financial transactions the company makes. What does it show' A General Ledger shows; Assets, liabilities, owner's equity, revenue, and expense; often, gains and losses are sometimes shown. Please review the section where the book talks about normal balance and post your constructive thoughts on normal balance. A Normal balance is the accounting classification of an account. It is part of double-entry book-keeping technique. An account has either credit or debit Accounts are the basic building blocks of an accounting system.  An account is a category of information like a file in which a certain type of information is stored. The reason for establishing an account is that the business needs specific information pulled together in order to prepare a financial statement or some other account report. An account is the master record that is maintained for each individual financial statement asset, liability, equity, revenue, expense, or dividend component. Every financial statement element (cash, accounts receivable, inventory, land, accounts payable, etc.) would have its own account and show the impact of all transactions causing a change to that account. Debits and credits are accounting tools. Debit (often abbreviated "dr") and sometimes taken to mean "to record on the left-hand side of an account," is simply the action of recording an increase to an asset, expense, or dividend account.   Credit (abbreviated "cr") and sometimes taken to mean "to record on the right-hand side of an account" is the action of recording a decrease to those same accounts.   Debit = Decrease, on the left, increases in assets and expenses are recorded as debits. Credit = Increase, on the right, for liability, revenue, and equity.  Increases in assets and expenses are recorded as debits and increases in liabilities and sales revenue are recorded as credits.  Debits will always equal Credits. To keep the accounting equation in balance one will have to use the system of debits and credits. Example of 4 accounts.                 Assets                                                               Liabilities and Owner’s Equities Increases     Decrease                       Decrease Increase Debits          Credits                                                            Debits                      Credits        Expenses and Losses___                                                   Revenue and Income____  Increases                      Decreases                                         Decreases Increases                             Debits                        Credits                                               Debits                       Credits   Reference Walther. (2012). Principles of Accounting: Volume I (1st ed.). San Diego, CA: Bridgepoint Education, Inc.