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Accounting refers to the process of recording all financial transactions of an entity. The process includes recording, summarizing and reporting all financial transactions of an entity to regulators, agencies and tax collection bodies. Ideally, the financial statements used in the process of accounting highlight:
As one of the key features in an entity’s business operation, accounting should be handled by authorized and competent personnel. If the business is a small firm, it can be handled by an accountant or a bookkeeper. However, accounting activities should be conducted by a sizeable finance department with several employees in the department for larger companies. The reports generated from accounting activities such as managerial accounting and cost accounting go a long way in helping the management predict trends and make informed business decisions.
The general financial statements that summarize an entity’s operations, cash flow and financial position over a certain period should be concise and provide consolidated reports based on a collection of separate financial transactions.
The three different types of accounting that efficiently track the income and expenses of an entity include:
Financial accounting focuses on external entities that have expressed interest in the business. Ideally, the accounting personnel generate interim and annual financial statements that can be presented before investors.
In financial accounting, all financial transactions during an accounting period are analyzed and summarized into a balance sheet, income statement and statement of cash flows. Such documents help investors to understand the financial positions of a company before making long-standing decisions.
The financial statements of most entities are normally audited annually by external auditors. The results of the audit usually have several implications in different business operations of a company. For instance, bodies that consider extending credit to a company would require the financial statements before making the decisions.
Managerial accounting uses the data as financial accounting but organizes the data and uses it in different ways. Generally, in managerial accounting, an accountant generates monthly or quarterly financial reports used by the management to make decisions on the business operations. As a result, managerial accounting makes use of several facets of accounting, including forecasting, budgeting and different financial analysis tools.
In general terms, any financial information that would help the management make informed decisions fall under this category.
While managerial accounting helps make informed decisions on the management of a business, cost accounting helps in making cost decisions. Ideally, cost accounting takes into account all costs sued in producing a product or the desired result. After that, business owners, analysts and managers use the information to determine the cost of the product. In cost accounting, money is considered an economic production factor, while in financial accounting, money is considered a measure of an entity’s economic performance.
Most accountants often use the Generally Accepted Accounting Principles (GAAP) when preparing an entity’s financial statements. The GAAP provides set standards and principles designed to create uniformity of financial processes across the industry.
Accounting can be referred to processes of recording and analyzing the financial transaction of a company in order to understand financial position and make informed decisions.
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In order to help you understand accounting concepts, we always provide step-wise explanations on how we arrive at the answers. This way, you can
Essay writer 4me is committed to meeting all deadlines set in the order of form. In addition, we will ensure transparency throughout the writing process so that you can track the progress of the paper.
Among our most prevalent attributes is that we always stick to the instructions provided by the student to produce customized accounting solutions.
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