...Explaining Basic Accounting Concepts and Business Structures ACC/537 Dec, 5, 2011 Explaining Basic Accounting Concepts and Business Structures The purpose of the paper is to explain basic accounting concepts and business structures. This paper covers four topics, which include the following: 1. Identify and describe the sources of generally accepted accounting principles (GAAP). 2. Describe effective accounting information using the qualities of accounting information. 3. Describe how an accrual-based accounting system is different from a cash-based of accounting 4. Describe the types of business structures and the defining features of each structure. The Sources of Generally Accepted Accounting Principles There are four categories in the house of GAAP, Category A through D. They are also in the order of the hierarchy. There are three major sources of GAAP in Category A. They are Financial Accounting Standards Board (FASB) Standards, Interpretations, and Staff Positions; Accounting Principles (APB) Opinions; and American Institute of Certified Public Accountants (AICPA) Accounting Research Bulletins. They are most authoritative pronouncements. Category B includes FASB Technical Bulletins which is no longer issued, AICPA Industry Audit and Accounting Guides and AICPA Statements of Position. Category C has FASB Emerging Issues Task Force and AICPA AcSEC Practice Bulletins. Category D has the least authoritative pronouncements: AICPA Accounting interpretations...
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...Basic Accounting Concepts Vai Ma’ake University of Idaho Financial Accounting ACCP/537 March 19, 2011 Introduction To identify and describe the sources of generally accepted accounting principles (GAAP). Also identify the source hierarchy and explain why the hierarchy is important. Describe effective accounting information using the qualities of accounting information and how an accrual basis of accounting system is different from a cash basis of accounting. Finally, describing the different types of business structures and the defining features of each structure (University of Phoenix Syllabus, 2011). Basic accounting concepts In successfully running and operating a business, business structure and basic accounting concepts must be present to operate well. The generally accepted accounting principles also known as the (GAAP) set standards to the financial statements. The standards set by the GAAP must also include effective accounting information. Companies do have the option either to use accrual basis of accounting or cash basis of accounting. However, under the GAAP it does accept cash basis accounting. Companies will determine the type of business to do business in. However, these decisions do makes the difference in how successful a company is. [pic]GAAP The GAAP are standards, which are universally practiced and generally accepted in accounting. These standards and rules are for accountants to use in compiling...
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...Generally accepted accounting principles (GAAP), created with authoritative support, are principles, rules and guidelines required to follow by accountants when preparing financial statements. The Hierarchy of GAAP is a structure consists of four different categories of well- developed accounting principles. The categories are from A to D with category A containing principles with the most authoritative support and category D having the lease. Major sources of The Hierarchy of GAAP are FASB Standard, Interpretations, and Staff Positions; APB Opinions; and AICPA Accounting Research Bulletins. This hierarchy is important because it minimize the financial data from being biased and inconsistency by using multiple sources of the GAAP instead of just one. For example, if two or more sources in a given category do not agree with a specific transaction, then a higher category should be followed. Two primary qualities that make its accounting information effective are relevance and reliability. Relevant information has predictive value, which help users foretell the outcome of events in the past, present, and future. Another reason relevant information is effective is that it is presented in a timely manner early enough for the user to consider when making a decision. It also helps users clarified and adjusted expectations in the past because relevance information has feedback value. Reliability is another quality that makes its accounting information effective. Reliable information...
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...801414063 Principle of Accounting (EIB505) Section: B Executive Master of Business Administration Submitted To: Mr. Mohammad Rakib Uddin Bhuiyan Assistant Professor Department of International Business Faculty of Business Studies EXECUTIVE SUMMARY A company’s financial reporting amalgamates important documents to create an effective spreadsheet to simplify the financial data of an organization. It captures much of the information that organizations prepare, publish, and use. Financial reporting plays an integral role in the capital markets and economic stability and growth, and efforts to enhance its quality are vital. A Sound Financial Reporting provides us relevant, meaningful, reliable, accurate and comprehensive reporting of management stewardship whether in the form of numbers or other operating data. It is increasingly important for businesses to be financially transparent and for governments to establish a sound regulatory environment for corporate financial reporting. Sound financial reporting can benefit business by some ways just like valuing business, easy to identify items, present business to prospective buyers effectively, able to explain changes in the business over time, spend less money on accounting and consulting fees etc. When we need to sell the business...
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...THE CONCEPTS OF ACCOUNTING AND QUALITIES OF ACCOUNTING INFORMATION A) Accounting is the process of identifying, recording, classifying, summarizing and evaluating information’s that can be measured in monetary terms for accurate communication of these economic events through proper presentation and interpretation for users of the information to make a favorable decision. However for accounting to achieve its objective, than the carried information should have certain qualities and six of them are explained with example below; 1. Accounting information must be relevant. The information must be essential to users to predict future possible outcomes. Relevant information should inform the users the financial performance of the entity to make accurate decisions. However, if the information limits users to know the financial performance of the entity to for tile future happening than the information has failed it relevant. For example if net income and its associates confirm investors predictive about future cash generation ability then the net income has feedback value for investors making it a relevant information. 2. Accounting information must be reliable. A quality business decision making is positively related to reliability of accounting information. The information can be reliable if it is verifiable and is natural. Verifiable means the information should prove be-young doubt by showing clearly income and expenses posted to the accounting general ledges for...
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...International Journal of Accounting & Information Management The role of corporate governance in convergence with IFRS: evidence from China Yu Chen Zabihollah Rezaee Downloaded by UNIVERSITI MALAYSIA SABAH At 05:16 06 October 2015 (PT) Article information: To cite this document: Yu Chen Zabihollah Rezaee, (2012),"The role of corporate governance in convergence with IFRS: evidence from China", International Journal of Accounting & Information Management, Vol. 20 Iss 2 pp. 171 - 188 Permanent link to this document: http://dx.doi.org/10.1108/18347641211218470 Downloaded on: 06 October 2015, At: 05:16 (PT) References: this document contains references to 50 other documents. To copy this document: permissions@emeraldinsight.com The fulltext of this document has been downloaded 1824 times since 2012* Users who downloaded this article also downloaded: Songlan Peng, Kathryn Bewley, (2010),"Adaptability to fair value accounting in an emerging economy: A case study of China's IFRS convergence", Accounting, Auditing & Accountability Journal, Vol. 23 Iss 8 pp. 982-1011 http://dx.doi.org/10.1108/09513571011092529 Randy Moser, (2014),"IFRS and convergence in China and the USA", Journal of Technology Management in China, Vol. 9 Iss 1 pp. 56-66 http://dx.doi.org/10.1108/JTMC-12-2013-0042 Ronita D. Singh, Susan Newberry, (2008),"Corporate governance and International Financial Reporting Standard (IFRS): The case of developing countries", Research in Accounting in Emerging Economies...
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...MANAGEMENT ACCOUNTING: AN OVERVIEW Learning Objectives Distinguish between managerial & financial accounting. Understand the evolution of management accounting. Explain about the IFAC model. Understand how managers can use accounting information to implement strategies. Explain about Relevant Lost & Relevant Regained. 2 Learning Objectives Distinguish between managerial & financial accounting. Understand the evolution of management accounting. Explain about the IFAC model. Understand how managers can use accounting information to implement strategies. Explain about Relevant Lost & Relevant Regained. 3 Accounting System (accumulates financial and managerial accounting data) Managerial Accounting Information for decision making, and control of an organization’s operations. Internal Users Financial Accounting Published financial statements and other financial reports. External Users Managerial Accounting Users of information Managers within company Regulation Financial Accounting Interested outside parties Required. Must comform to Not required because for internal GAAP which is regulated by use only FASB and SEC. Basic accounting system plus Almost exclusively from the Source of Data various other sources basic accounting system Reports often focus on subunits. Reports focus on the enterprise Nature of Reports Based on a combination of in its entirety. Based on and...
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...Accounting Concepts and Structures According to Kieso, Weygandt and Warfield (2007), “the objectives of financial reporting are to provide information that is: (1) useful to those making investment and credit decisions; (2) helpful to present and potential investors and creditors in assessing the amounts, timing, and uncertainty of future cash flows; and (3) about economic resources,” (pg. 31). For accounting information to be effective, it must have primary and secondary decision making qualities. The qualities described below are an effective means to making decisions towards a company’s financial goals. Relevance and reliability are the two primary qualities in accounting information used in decision making, while comparability and consistency are secondary qualities in accounting information which further promotes and provides specimens for examination to further cement the decision. Relevance The first qualitative characteristic is relevance. Relevance speaks to information’s ability to influence a decision. Relevant information should be applicable, pertinent, and important. According to Kieso, Weygandt and Warfield (2007), “accounting information must be capable of making a difference in a decision in order to be relevant and information with no bearing on a decision is irrelevant,” (pg. 33). It should directly speak to the issue at hand without side-stepping or vacuity. For the information to be relevant it must also be appropriate with the time constraints allowed...
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...Explaining Basic Accounting Concepts and Business Structures Generally Accepted Accounting Principles (GAAP) are guidelines for accounting that have either been specifically established by one of the governing bodies tasked with establishing and overseeing accounting practices or are “accepted” as a practice by having been time proven and having “universal” application (Kieso, Weygandt, and Warfield (2007). There are four main organizations that are “instrumental in the development of financial standards (GAAP) in the United States.” (Kieso, Weygandt, and Warfield (2007). These are the Securities and Exchange Commission (SEC), the American Institute of Certified Public Accountants (AICPA), Financial Accounting Standards Board (FASB), and the Government Accounting Standards Board. (GASB) (Kieso, Weygandt, and Warfield (2007) The SEC is the sole body for enforcement, with the AICPA and the FASB having been created at the urging of the SEC for a private sector entity to use its resources to establish effective guidelines. The SEC continues to support the formation and improvement of accounting guidelines by the private sector as long as they are “subject to commission oversight” (Kieso, Weygandt, and Warfield (2007). The FASB uses “The Hierarchy of Generally Accepted Accounting Principles,” and they are listed as follows: FASB Standards, Interpretations, Staff Positions, APB (Accounting Principles Board), and AICPA Accounting Research Bulletins...
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...[Title Here, up to 12 Words, on One to Two Lines] ACCT 573 Accounting Quality Assignment # 2 April 23rd, 2016 Introduction The purpose of this research assignment is to analyze accounting quality in regards to the requirements set forth by the Sarbanes-Oxley Act of 2002 and SEC reporting requirements for publically traded corporations. Specifically, this paper analyzes the roles of the Board of Directors (BOD) and CEO’s regarding the establishment of an ethical workplace environment, which generates quality accounting information to be used by shareholders and other investors. Next, a proposed strategy will be recommended to a CEO of a publicly traded corporation, in regards to leading an ethical workplace environment which yields high quality accounting data on a consistent basis. Similarly, a suggestions to management will be made concerning providing assurance to investors with reference to upcoming performance forecasts or expected earnings. The next analysis will be focused on evaluating potential consequences to publicly traded corporations when there is a lack of quality within financial accounting and reporting, and making a recommendation on how to minimize those consequences will be provided. Lastly, the requirements of the Sarbanes-Oxley Act will be assessed in regards to the sufficiency of protection placed on stockholders and potential future investors. Roles of the Board of Directors and CEO First and foremost, the roles of Executives and the Board...
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...Accounting Information Systems Research Paper Abstract The Sarbanes-Oxley Act of 2002 (SOX) was enacted into law in 2002 in the wake of corporation financial reporting scandals involving large publicly held companies. SOX instituted new strict financial regulations with the intent of improving accounting practices and protecting investors from corporate misconduct. SOX requires corporate executives to vouch for the accuracy of financial statements, and to institute and monitor effective internal controls over financial reporting. The cost of implementing an effective internal control structure are onerous, and SOX inflicts opportunity costs upon an enterprise as executives have become more risk adverse due to fears of incrimination. The Public Company Accounting Oversight Board (PCAOB) was created by SOX to oversee the accounting process and dictate independence requirements for auditors and auditing committees. The PCAOB proposed regulations must be approved by the SEC before they are enacted. Since the passage of SOX, the IT department has become critical in designing and implementing the internal controls in company accounting information systems. The Information Technology Governance Institute (ITGI) created a framework called Control Objectives for Information and Related Technology (COBIT) to provide guidance for companies to implement and monitor IT governance. Accounting Information Systems Research Paper The Sarbanes-Oxley Act of 2002 changed the...
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...Basic Accounting Concepts and Business Structures David Lickem ACC/537 April 15, 2013 Basic Accounting Concepts and Business Structures The accounting profession as a whole is extremely complex and ripe with regulations and rules. It is also enormously important to any organization, big or small, and thus can be a very intimidating career choice. As with anything else though, reaching a destination requires a starting point, and in accounting, a good starting point is to understand basic accounting concepts and business structures. These basic accounting concepts include but are not limited to the Generally Accepted Accounting Principles, the qualities of effective accounting information, and the differences between accrual based accounting and cash based accounting. The different types of business structure are also an important concept in understanding the basics of accounting. Generally Accepted Accounting Principles: Sources and Hierarchy The stock market crash of 1929, which led to the Great Depression, resulted in a demand for more government regulation in financial institutions and the stock market. The Securities and Exchange Commission (SEC) was established with the goal of developing and standardizing financial information presented to stockholders, and since then the SEC has worked alongside several private organizations to develop the Generally Accepted Accounting Principles (GAAP) Sources of GAAP The American Institute of Certified Public Accountants...
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...Accounting Information Systems Research Paper Abstract The Sarbanes-Oxley Act of 2002 (SOX) was enacted into law in 2002 in the wake of corporation financial reporting scandals involving large publicly held companies. SOX instituted new strict financial regulations with the intent of improving accounting practices and protecting investors from corporate misconduct. SOX requires corporate executives to vouch for the accuracy of financial statements, and to institute and monitor effective internal controls over financial reporting. The cost of implementing an effective internal control structure are onerous, and SOX inflicts opportunity costs upon an enterprise as executives have become more risk adverse due to fears of incrimination. The Public Company Accounting Oversight Board (PCAOB) was created by SOX to oversee the accounting process and dictate independence requirements for auditors and auditing committees. The PCAOB proposed regulations must be approved by the SEC before they are enacted. Since the passage of SOX, the IT department has become critical in designing and implementing the internal controls in company accounting information systems. The Information Technology Governance Institute (ITGI) created a framework called Control Objectives for Information and Related Technology (COBIT) to provide guidance for companies to implement and monitor IT governance. Accounting Information Systems Research Paper The Sarbanes-Oxley Act of 2002 changed the...
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...537 Basic Accounting Concepts Sources of GAAP There are four bodies who take part in the creation of Generally Accepted Accounting Principles. The first of which is the Securities and Exchange Commission (SEC). Companies that go public must file financial statements with the SEC. The SEC creates a standard of financial statements that the companies must file. The SEC works with the private sector as well by encouraging resolving reporting problems and may also reject standard proposals. The SEC may also issue deficiency letters and stop orders when they believe a company’s financial statements contain errors. The second group responsible for developing GAAP is the American Institute of Certified Public Accountants (AICPA). The AICPA has introduced boards and committees that help develop GAAP. The Committee on Accounting Procedure (CAP) was founded by the AICPA and issued Accounting Research Bulletins that dealt with accounting issues on a problem by problem basis. CAP was eventually dissolved, and the Accounting Principles Board was developed. Their main goal was to create a conceptual framework. It issued APB opinions and was also later dissolved. The third responsible party in GAAP creation is the Financial Accounting Standards Board (FASB). “Its mission is to establish and improve standards of financial accounting and reporting for the guidance and education of the public, which includes issuers, auditors, and users of financial information (Kieso, Waygandt...
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...accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and established criteria. Auditing should be done by a competent, independent person. “The auditing profession offers a wide range of employment opportunities for new accountants. Most accounting firms offer client services in three areas: auditing, tax, and consulting. A new accountant might be hired to work in any of these areas. In the audit area, the accountant may work for a variety of clients including private or public companies, clients in banking, insurance, manufacturing, technology, retail, health care, or government. Individuals working in the audit area may also spend most of their time providing internal audit services to clients rather than working as an external auditor. Working in any of the areas in an accounting firm may be one of the most demanding jobs, but it is also one of the most interesting, exciting experiences and a great way to prepare to work in the corporate business world.” “What is Auditing?” Web. 29 September 2013 Accounting is the recording, classifying, and summarizing of economic events in a logical manner for the purpose of providing financial information for decision making. To provide relevant information, accountants must have a thorough understanding of the principles, and rules that provide the basis for preparing the accounting information. In addition, accountants must develop a system...
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