Accounting

Accounting Tabitha Smith ACC 280 November 15, 2010 James Gajda Accounting Accounting is said to be a means of communicating numbers, it consists of three basic activities; identify, record, and communicate the electronic events of an organizations for those interested users. In accounting in order to identify economic events the company selects an economic event relevant to the business. Once that information is collected it is turned into records, which consists of forming the collected information into systematic chronological diary of events that is measured in dollars and cents. Once that information is gathered it is turned into the process of communicate, which is a means of turning the information into accounting reports for interested users. The most common means of account reporting is financial statements, this means reports that are standardized, or reporting information as one amount of data. Basically financial statements are a means of organized numbers combined into one to give a whole amount. However, in order to properly give information an accountant must be able to analyze and interpret all the information that was given. There are four types of financial statements, each one gives different but vital information and all four of these are important in the accounting department of a business. The first financial statement is the income statement; it reports the success or profit of the company’s operations over a specific period of time. First listed on the income statements is revenues, then expenses, finally net income or net loss. Basically when revenues are greater than expenses it the result is net income, however when expenses exceed revenues it is considered a net loss. The income statement however does not include investment and dividend transaction between stockholder and the business. This statement would be particularly useful for employers, this way they are able to keep an organized means of all spending, also investors because they need to see where their money is going and for what. The second financial statement is the retained earnings statement this reports changes in the retained earning for a specific period of time, basically it is the same time that is covered by the income statement. Information to prepare this statement comes from the retained earnings column of the tabular summary and the income statement. The beginning of the retained earnings amount is shown on the first line of the income statement, and then there is the net income and dividends, followed by the ending balance and the final amount on the statement. Information from this statement tells the reasons why retained earnings increased or decreased during a time period. I think managers would use this statement to find out what the reasons are if they are making money or not, employers would use this to see where their money is going, investors would make sure they are making profits, and creditors would be the same as investors wanting to know where their money is going. The third type of financial statement is the balance sheet it reports the assets, liabilities, and stockholders equity at a specific date. All assets are listed at the top of the balance sheet, then liabilities and stockholders equity. Total assets must be equal to the total liabilities and stockholders equity. Balance sheets basically give a snapshot of the company’s financial position at a specific time. I believe the main users of this statement would be managers, employers, investors, and creditors because it gives a detailed financial condition at any moment in time. The fourth financial statement is the statement of cash flows this provides information of cash receipts and payments during a specific time. Statement of cash flows reports cash effects of company’s operations, investing transactions, financing transactions, net increase or decrease in cash, and the cash amount at the end of a period. This is important because the investors and creditors want to know what happens to the company’s most liquid resource. In conclusion, accounting is the main department that makes sure a business is making money, and if it is not making money the reports dictate why and where the company’s money is going. The four financial statements are crucial to working with each other because information from each is pieced together for creditors, investors, employers, and managers to make decisions for, with, or about the company. Accounting In Action. Retrieved from https://ecampus.phoenix.edu/content/eBookLibrary2/content/DownloadList.aspx'assetMetaId=16282ccd-74d8-4d37-ba59-e30615415db7&assetDataId=d65f9a14-00cb-4145-8500-bb4a0f0c955e.