THE ROLES OF ACCOUNTING ON BUSINESS AND OUR SOCIETY
MARCH 4, 2014
MR. TIMOTHY CARR
1. Describe the purpose of each financial statement. Determine which one (1) is the most effective in communicating the financial health of an organization. Defend your position. Income Statement presents revenues and expenses and resulting net income or net loss for a specific time period. Owner’s Equity Statement is a summary of the changes in the owner’s equity for a period of time. Balance Sheet reports all assets, liabilities and owner’s equity at a specific date. Statement of Cash Flows is a summary of information about cash inflows (receipts) and outflows (payments) for a specific time period. In my opinion the statement of cash flows is the most effective in communicating the health of an organization. It lists all of the money that comes in and out of the business to keep it running, from revenue to net profit/ loss. Most people who would consider investing in a business would like to see this statement. In the event I was in the market for investing in an organization or business, I would want to see all of the previously stated financial statements. In order to make a wise decision as to whether it would prove to be worth my time and money. Though some businesses have been known to “cook” the books to look profitable, it helps to be knowledgeable about the different financial statements and their purpose.
2. Compare major functions of an accountant to that of a certified public accountant. Make an argument for and against the importance of accounting in our society from a U.S or global perspective.
Both CPAs and accountants share similar roles of making sure financial records are in order. They both collect and organize financial data. An accountant works with bookkeepers, which handle daily financial transactions and entries made to the general ledger and review accounts payable, accounts receivable as well as payroll. Accountants generally report to accounting managers, financial directors or company controllers, all who might be certified public accountants. An accountant must pass the Uniform Certified Public Accountant Exam. They must meet their specific state education and experience requirements before even being able to sit for the exam. Accountants who have not taken the exam cannot use the CPA designation legally. CPAs have more responsibility than accountants. Because of their certification they can perform auditing and tax services to individuals as well as organizations and companies.
Accounting is important to the society of today. The companies and organizations look to the government to bail them out when they are in a crisis. Which is not fair to the taxpayers. Accounting shows an honest look into a company and how they handle their business. Whether they are U.S based or international the books must be approached the same way. Every transaction must be accurately documented and accounted for to show their financial stability. On the contrary accounting can be seen as tedious, time consuming and boring.
3. Imagine that you have decided to create your own business venture. Determine whether the company will be a service or merchandising company. Describe the differences between the charts of accounts for both companies.
The company I have imagined would be a service company. The Billing cycle for the business that offers the service is less tedious and time consuming. Typically there is only an accounts receivable in this type of business. Payments are made when the services are rendered, no exceptions. Merchandising uses the base of the service cycle but the purchasing of merchandise (inventory) and its potential sale lengthens the cycle. With merchandising the number of accounts have to be added to account for purchases...
References: Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, 2014-15 Edition, Bookkeeping, Accounting, and Auditing Clerks,
on the Internet at http://www.bls.gov/ooh/office-and-administrative-support/bookkeeping-accounting-and-auditing-clerks.htm (visited March 04, 2014).
Similarities and Differences Between Accounting and Bookkeeping by Kate Bluest http://smallbusiness.chron.com/similarities-differences-between-accounting-bookkeeping-59002.html
Accountant Jobs Descriptions http://hiring.monster.com/hr/hr-best-practices/recruiting-hiring-advice/job-descriptions
Accounting Principles Volume 1, 11th Edition 2013, Jerry J. Weygandt PhD, CPA; Paul D. Kimmel PhD, CPA; Donald E. Keiso PhD, CPA
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