In the accounting field, some of the primary goals are to record transactions, keep financial records, perform internal audits, report and analyze financial information to the management, and advise on taxation matters. Those who are involved in the accounting management field will usually have a good understanding of the accounting process by which data relative to a business are gathered, classified, and set forth in financial reports to fully understand the basis of accounting you must first understand its terminology.
For this module case assignment, I will conduct some research on accounting terms and discuss the definitions of these accounting terms that relate to: Generally Accepted Accounting Principles, Contra-Asset Accounts, Historical Cost, Accrual Basis vs. Cash Basis Accounting, and Accounting Standards Codification, and explain why this concept is important to financial statements. I will also describe the general organization of three sets of financial statements from three companies, offer my opinion as to whether Net Income or Cash from Operating Activities is more useful for each of the three companies, predict the companies' future trends using Net Income or Cash Flows, and provide one additional conclusion about each company using information found in the annual report.
According to Investopedia, the term, Generally Accepted Accounting Principles (GAAP), “is the common set of accounting principles, standards and procedures that companies use to compile their financial statements. GAAP are a combination of authoritative standards (set by policy boards) and simply the commonly accepted ways of recording and reporting accounting information” (Investopedia).
Contra-Asset Accounts is an asset account which is expected to have a credit balance. The contra asset account is related to another asset account (AccountingCoach).
Historical Cost describes