Week 9 Quiz Notes
Week 9 Quiz Notes BUS 1010
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This 3 page Class Notes was uploaded by Rachel Notetaker on Sunday February 28, 2016. The Class Notes belongs to BUS 1010 at Clemson University taught by Bill Tumblin in Summer 2015. Since its upload, it has received 19 views. For similar materials see Intro to Business in Business at Clemson University.
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Date Created: 02/28/16
Week 9 Assignment Notes to Study a. The definition and purpose of accounting and bookkeeping. Accounting is the recording, classifying, summarizing, and interpreting of financial events and transactions in an organization to provide management and other interested parties the financial information they need to make good decisions about its operations A major purpose of accounting is to help managers make well-informed decisions. Another is to report financial information about the firm to interested stockholders, such as employees, owners, creditors, suppliers, unions, community activists, investors, and the government (for tax purposes). Bookkeeping, the recording of business transactions, is a basic part of financial reporting. The purpose of bookkeeping is to organize and keep the journal in order to make financial reports easier to put together. It is very important that the bookkeeper record all transactions correctly and carefully, for it is where the accountant begins when reporting financial information. Accounting, however, goes far beyond the mere reporting of financial information. b. The types and purposes of the accounting disciplines. Managerial Accounting provides information and analysis to managers inside the organization to assist them in decision-making. Managerial accounting is concerned with measuring and reporting costs of production, marketing, and other functions; preparing budgets (planning); checking whether or not units have stayed within their budgets (controlling); and designing strategies to minimize taxes. Financial Accounting differs from managerial accounting in that the financial information and analyses it generates are for people primarily outside the organization. Their purpose is to demonstrate whether an organization is profitable, able to pay its bills, and establish how much debt it has to the outside observers, like creditors and lenders, employee unions, customers, suppliers, government agencies, and the general public. Reviewing and evaluating the information used to prepare a company’s financial statements is referred to as auditing. The purpose of auditing is to guarantee that the organization is carrying out proper accounting procedures and financial reporting. A tax accountant is trained in tax law and is responsible for preparing tax returns, or developing tax strategies. The job of the tax accountant is always challenging since the governments often change tax policies according to specific needs or objectives. As the burden of taxes grow in the economy, the role of the tax accountant becomes increasingly valuable to the organization, individual, or entrepreneur. Government and non-for-profit accounting supports organizations whose purpose is not generating a profit, but serving ratepayers, taxpayers, and others according to a duly approved budget. The purpose of this type of accounting is to ensure that the government is fulfilling its obligations and making proper use of taxpayers’ dollars. c. The definition and purpose of the accounting cycle. The accounting cycle is a six-step procedure that results in the preparation and analysis of the major financial statements. It relies on the work of both a bookkeeper and an accountant. The purpose is to help the businesses keep it’s accounting records in an orderly fashion and to report financial information. It is important when keeping accurate accounting records because an accurate accounting system keeps everything, and shows how you are really doing, and if you are making a profit or taking a loss. You are able to see if there is a need to adjust prices. d. The definitions of the fundamental accounting equation and the three key financial statements. Assets = Liabilities + Owner’s Equity Imagine you don’t owe anybody money. That is, you have no liabilities (debt). In this case, your assets (cash and so forth) are equal to what you own (your equity). However, if you borrow money from a friend, you have incurred a liability. Your assets are now equal to what you owe plus what you own. A financial statement is a summary of all the financial transactions that have occurred over a particular period. There are three key financial statements: 1. A balance sheet is the financial statement that reports a firm’s financial condition at a specific time. A balance sheet basically shows all the aspects of the accounting equation balanced. Assets are listed in a separate column from liabilities and owners’ (or stockholders’) equity. The assets are equal to, or balanced with, the liabilities and owners’ (or stockholders’) equity. The balance sheet is that simple. 2. The financial statement that shows a firm’s bottom line—that is, its profits after costs, expenses, and taxes—is the income statement. The income statement summarizes all the resources, called revenue, that have come into the firm from operating activities, money resources the firm used up, expenses it incurred in doing business, and resources it has left after paying all costs and expenses, including taxes. The resources (revenue) left over or depleted are referred to as net income or net loss. 3. The statement of cash flows reports cash receipts and cash disbursements related to the three major activities of a firm: Operations are cash transactions associated with running the business Investments are cash used in or provided by the firm’s investment activities. Financing is cash raised by taking on new debt, or equity capital or cash used to pay business expenses, past debts, or company dividends. Sources of Information (to avoid plagiarism) http://accoutning.weebly.com/purpose-of-accounting-cycle.html and http://www.mhlearnsmart.com/flow/smartbook.html? sectionId=56186032&instructorId=14413897&assignmentDueDate=2016- 03- 02%2004:59:00&isEbookAccess=true&ts=1456616640401&isbn=125931001 9&userId=18861549&role=S&externalProductId=A9L0141900&key=ad1efda 8827c663ffd036b53542a6049&assignmentId=1107200007&lastName=Jones &ebookLinkUrl=http%3A%2F%2Fconnect.mheducation.com%2Fconnect %2FhmEBook.do&email=rej2%40clemson.edu&isBlackBoardUrl=false&timeZ one=-4.0§ionName=BUS+1010+Spring+2016++Wednesday+- +Tumblin&firstName=Rachel§ionURL=http%3A%2F %2Fconnect.mheducation.com%2Fconnect %2FhmStudentSectionHomePortal.do%3FsectionId%3D56186032 (BUS book)
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