BUSN 5200 Homework Week 2

Topics: Generally Accepted Accounting Principles, Balance sheet, Income statement Pages: 4 (942 words) Published: November 23, 2014

1. Define the process of accounting.

Accounting is the process of identifying, measuring and communicating economic information to allow informed judgments and decisions by users of the information. It is the language of business. This implies that for any business to survive and thrive it is vital for it to establish a strong accounting system. A qualified accountant is assigned the duty of meeting all the stages in the accounting process.

2. What are the three major divisions in the accounting field? Financial Accounting: Generally refers to the process that results in the preparation and reporting of financial statements for an entity. The main object of Financial Accounting is to find out the profitability and to provide information about financial position of the concern. It presents a general idea of the workings of the business and permits management to control in general way the major functions of a business, finance, administration, production and distribution. But Financial Accounting does not give details. Management Accounting: Is concerned with the use of economic and financial information to plan and control many activities of the entity and to support the management decision-making process. The primary objective of Management Accounting is to supply relevant information at appropriate time to the management to enable it to take the decisions and effect control. Cost Accounting: The main objects of Cost Accounting is to find out the cost of goods produced or services rendered by business. It also helps the management to detect and control all leakages, defective works, and wastage in tools and stores. 3. What is the Fundamental Accounting Equation?

Assets = Liabilities + Equity

This equation is also the basis for the most basic of accounting reports, aka the Balance Sheet. A balance sheet reports what a business owns (assets), what it owes (liabilities) and what remains for the owners (equity) as of a certain date. This...
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