Wednesday, 18 January 2012
Guidelines for Revenue Recognition
In general, the guidelines for revenue recognition are quite broad. On top of the broadguidelines, certain industries have specific additional guidelines that provide furtherinsight into when revenue should be recognized. The revenue recognitionprinciple provides that companies should recognize revenue (1) when it is realizedor realizable and (2) when it is earned. Therefore, proper revenue recognitionrevolves around three terms Revenues are realized when a company exchanges goods and services for cash orclaims to cash (receivables).Revenues...
Who Uses Accounting Data
The information that a user of financial information needs depends uponthe kinds of decisions the user makes.There are two broad groups of usersof financial information: internal users and external users. INTERNAL USERSInternal users of accounting information are those individuals inside a companywho plan, organize, and run the business. These include marketing managers, productionsupervisors, finance directors, and company officers.Managerial accounting provides internal reports to help usersmake decisions about their companies. Examples...
WHAT IS ACCOUNTING? (2)
Why is accounting so popular? What consistently ranks as one of the topcareer opportunities in business? What frequently rates among the mostpopular majors on campus? What was the undergraduate degree chosenby Nike founder Phil Knight, Home Depot co-founder Arthur Blank, former actingdirector of the Federal Bureau of Investigation (FBI) Thomas Pickard, and numerousmembers of Congress? Accounting.1 Why did these people choose accounting?They wanted to understand what was happening financially to theirorganizations. Accounting is the financial information...
Tuesday, 17 January 2012
Timing issues
Accountants divide the economic life of a business into artificial time periods (Time Period Assumption)Generally a month, a quarter, or a year.Fiscal year vs. calendar yearAlso known as the "Periodicity Assumption" Accrual- vs. Cash-Basis Accounting Accrual-Basis Accounting Transactions recorded in the periods in which the events occurRevenues are recognized when earned, rather than when cash is received. Expenses are recognized when incurred, rather than when paid. Cash-Basis AccountingRevenues are recognized when cash is...
The Ledger
A General Ledger contains the entire group of accounts maintained by a company.
The General Ledger includes all the asset, liability, owner’s equity, revenue and expense accounts...
Double entry
Double-entry accounting systemEach transaction must affect two or more accounts to keep the basic accounting equation in balance.Recording done by debiting at least one account and crediting another.DEBITS must equal CREDITS
If Debits are greater than Credits, the account will have a debit balance.If Credits are greater than Debits, the account will have a credit balanc...
Accounting Career Opportunities
Public AccountingCareers in auditing and taxation serving the general public.
Private AccountingCareers in industry working in cost accounting, budgeting, accounting information systems, and taxation.
Opportunities in GovernmentCareers with the IRS, the FBI, the SEC, and in public colleges and universities.
Forensic AccountingCareers with insurance companies and law offices to conduct investigations into theft and fraud...
Ethics In Financial Reporting
Standards of conduct by which one’s actions are judged as right or wrong, honest or dishonest, fair or not fair, are Ethics.* Recent financial scandals include: Enron, WorldCom, HealthSouth, AIG, and others.* Congress passed Sarbanes-Oxley Act of 2002.* Effective financial reporting depends on sound ethical behavi...
What is Accounting?
The purpose of accounting is to: identify, record, and communicate the economic events of an organization to interested use...
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