College Accounting Homework help
Let us first see what is accounting?
Accounting is an information science used to collect, classifies, and handles financial data for organizations and individuals. Accounting is used to determine financial stability. Accountants determine an organization’s overall wealth, profitability, and liquidity. Accountants are essential employees in an organization and without their calculations no company can make long term goals. For example the budgets for marketing activities, profit reinvestment, and company growth all stem from the work of accountants. Accounting is one of the most important and dignified professions in the world and accountants can be found in every industry.
Types of Accounting:
1 - Financial Accounting
2 - Management Accounting
3 - Governmental Accounting
4 - Tax Accounting
5 - Forensic Accounting
6 - Project Accounting
7 - Social Accounting
Financial Accounting, or financial reporting, is the process of producing information for external use usually in the form of financial statements. Financial Statements show an organization's past records and current position based on a set of standards and guidelines known as GAAP (Generally Accepted Accounting Principles). This generally contains accounting standards (e.g. International Financial Reporting Standards), accounting conventions, and rules and regulations that accountants must follow in the preparation of the financial statements.
Management Accounting produces information which is generally more detailed than that produced for external use. It enables effective organization control and the fulfillment of the strategic aims of the entity. Information can be forecasts or records of budgets which enable enterprises to plan better for future. ‘Cost accounting’ is a branch of management accounting and involves the application of various techniques to monitor and control costs. Its application is more suited to manufacturing concerns.’
Governmental Accounting is also known as public accounting. It is used for accounting information used in the public sector. This is a slight aberration from the financial accounting used in the private sector. In public sector different aims and objectives of the state owned and privately owned institutions are present and therefore require accounting based information.
Tax Accounting refers to accounting for the tax related matters. It is governed by tax laws given by jurisdiction. Tax accountants use information under financial accounting system to give statements prepared according to tax law system. This information is used by tax professionals to estimate tax liability of a company and also for tax planning purposes.
Forensic Accounting is the use of accounting, auditing and investigative techniques in cases of litigation or disputes. They act as expert witness during court trials to state the financial effects of a loss or for detecting financial fraud. Insurance claims, personal injury claims, suspected fraud and claims of professional negligence in a financial matter (e.g. business valuation) are some of the cases where these experts are required.
Project Accounting refers to the use of accounting system to track the financial progress of a project by giving financial reports. These are principally used to give detailed account about a project of company like launch of a new product.
Social Accounting, also recognized as Corporate Social Responsibility Reporting and Sustainability Accounting, refers to the procedure of reporting inferences of an organization's activities on its conversational and social environment.
Accounting principles accounting trails a certain framework of core principles which makes the information generated through an accounting system valuable. Some basic principles are 1) 1. Economic Entity Assumption 2) Monetary Unit Assumption 3) Time Period Assumption 4) Cost Principle 5) Full Disclosure Principle 6) Going Concern Principle 7) Matching Principle 8) Revenue Recognition Principle 9) Materiality 10) Conservatism
ACCOUNTING PERIOD CONCEPT All the transactions are recorded in the books of accounts on the supposition that profits on these transactions are to be determined for a specified period. This is known as accounting period concept. Thus, this concept requires that a balance sheet and profit and loss account should be prepared at regular intervals. This is obligatory for different purposes like, calculation of profit, ascertaining financial position, tax computation etc.
ACCOUNTING COST CONCEPT Accounting cost concept states that all assets are noted in the books of accounts at their purchase price, which includes cost of acquisition, transportation and fitting and not at its market price. It concludes that fixed assets like building, plant and machinery, furniture, etc. are recorded in the books of accounts at a price paid for them. For example, a machine was purchased by XYZ Limited for$.500000, for manufacturing shoes. An amount of $.1, 000 was spent on transferring the machine to the factory site. In addition, $.2000 was spent on its installation. The total amount at which the machine will be recorded in the books of accounts would be the sum of all these items i.e. $.503000. This cost is also known as historical cost. Suppose the market price of the same is now $ 90000 it will not be shown at this value. Further, it may be illuminated that cost means original or acquisition cost only for new assets and for the used ones, cost means original cost less depreciation. The outcome of cost concept is that if the business entity does not pay anything for acquiring an asset this item would not appear in the books of accounts. Thus, goodwill appears in the accounts only if the entity has purchased this intangible asset for a price.
REALIZATION CONCEPT This concept says that revenue from any business transaction should be included in the accounting records only when it is realized. The term realization means formation of legal right to receive money. Selling goods is realization, receiving order is not. In other words, it can be said that: Revenue is said to have been recognized when cash has been received or right to receive cash on the sale of goods or services or both has been created.
ACCRUAL CONCEPT The meaning of accrual is something that becomes due especially an amount of money that is yet to be paid or received at the end of the accounting period. It means that revenues are recognized when they become receivable. Though cash is expected or not received and the expenses are recognised when they become payable though cash is paid or not paid. Both transactions will be recorded in the accounting period to which they relate. Therefore, the accrual concept makes a division between the accrual receipt of cash and the right to receive cash as regards revenue and actual payment of cash and compulsion to pay cash as regards expenses.
MATCHING CONCEPT The matching concept states that the revenue and the expenses incurred to earn the revenues must belong to the same accounting period. So once the revenue is realized, the next step is to allocate it to the relevant accounting period. This can be done with the help of accrual concept.
So ending my say upon accounting I would like to give a few conclusions:-*Accounting concept denotes to the basic assumptions which aid the basis of recording actual business transactions.*Business entity concept adopts that for accounting purposes, the business enterprise and its owner(s) are two separate entities.*Accounting period concept states that all the business transactions are enumerated in the books of accounts on the assumption that profits of transactions is to be ascertained for a specified time period.*Dual aspect concept states that every transaction has a dual effect.
Let us first see what is accounting?
Accounting is an information science used to collect, classifies, and handles financial data for organizations and individuals. Accounting is used to determine financial stability. Accountants determine an organization’s overall wealth, profitability, and liquidity. Accountants are essential employees in an organization and without their calculations no company can make long term goals. For example the budgets for marketing activities, profit reinvestment, and company growth all stem from the work of accountants. Accounting is one of the most important and dignified professions in the world and accountants can be found in every industry.
Types of Accounting:
1 - Financial Accounting
2 - Management Accounting
3 - Governmental Accounting
4 - Tax Accounting
5 - Forensic Accounting
6 - Project Accounting
7 - Social Accounting
Financial Accounting, or financial reporting, is the process of producing information for external use usually in the form of financial statements. Financial Statements show an organization's past records and current position based on a set of standards and guidelines known as GAAP (Generally Accepted Accounting Principles). This generally contains accounting standards (e.g. International Financial Reporting Standards), accounting conventions, and rules and regulations that accountants must follow in the preparation of the financial statements.
Management Accounting produces information which is generally more detailed than that produced for external use. It enables effective organization control and the fulfillment of the strategic aims of the entity. Information can be forecasts or records of budgets which enable enterprises to plan better for future. ‘Cost accounting’ is a branch of management accounting and involves the application of various techniques to monitor and control costs. Its application is more suited to manufacturing concerns.’
Governmental Accounting is also known as public accounting. It is used for accounting information used in the public sector. This is a slight aberration from the financial accounting used in the private sector. In public sector different aims and objectives of the state owned and privately owned institutions are present and therefore require accounting based information.
Tax Accounting refers to accounting for the tax related matters. It is governed by tax laws given by jurisdiction. Tax accountants use information under financial accounting system to give statements prepared according to tax law system. This information is used by tax professionals to estimate tax liability of a company and also for tax planning purposes.
Forensic Accounting is the use of accounting, auditing and investigative techniques in cases of litigation or disputes. They act as expert witness during court trials to state the financial effects of a loss or for detecting financial fraud. Insurance claims, personal injury claims, suspected fraud and claims of professional negligence in a financial matter (e.g. business valuation) are some of the cases where these experts are required.
Project Accounting refers to the use of accounting system to track the financial progress of a project by giving financial reports. These are principally used to give detailed account about a project of company like launch of a new product.
Social Accounting, also recognized as Corporate Social Responsibility Reporting and Sustainability Accounting, refers to the procedure of reporting inferences of an organization's activities on its conversational and social environment.
Accounting principles accounting trails a certain framework of core principles which makes the information generated through an accounting system valuable. Some basic principles are 1) 1. Economic Entity Assumption 2) Monetary Unit Assumption 3) Time Period Assumption 4) Cost Principle 5) Full Disclosure Principle 6) Going Concern Principle 7) Matching Principle 8) Revenue Recognition Principle 9) Materiality 10) Conservatism
ACCOUNTING PERIOD CONCEPT All the transactions are recorded in the books of accounts on the supposition that profits on these transactions are to be determined for a specified period. This is known as accounting period concept. Thus, this concept requires that a balance sheet and profit and loss account should be prepared at regular intervals. This is obligatory for different purposes like, calculation of profit, ascertaining financial position, tax computation etc.
ACCOUNTING COST CONCEPT Accounting cost concept states that all assets are noted in the books of accounts at their purchase price, which includes cost of acquisition, transportation and fitting and not at its market price. It concludes that fixed assets like building, plant and machinery, furniture, etc. are recorded in the books of accounts at a price paid for them. For example, a machine was purchased by XYZ Limited for$.500000, for manufacturing shoes. An amount of $.1, 000 was spent on transferring the machine to the factory site. In addition, $.2000 was spent on its installation. The total amount at which the machine will be recorded in the books of accounts would be the sum of all these items i.e. $.503000. This cost is also known as historical cost. Suppose the market price of the same is now $ 90000 it will not be shown at this value. Further, it may be illuminated that cost means original or acquisition cost only for new assets and for the used ones, cost means original cost less depreciation. The outcome of cost concept is that if the business entity does not pay anything for acquiring an asset this item would not appear in the books of accounts. Thus, goodwill appears in the accounts only if the entity has purchased this intangible asset for a price.
REALIZATION CONCEPT This concept says that revenue from any business transaction should be included in the accounting records only when it is realized. The term realization means formation of legal right to receive money. Selling goods is realization, receiving order is not. In other words, it can be said that: Revenue is said to have been recognized when cash has been received or right to receive cash on the sale of goods or services or both has been created.
ACCRUAL CONCEPT The meaning of accrual is something that becomes due especially an amount of money that is yet to be paid or received at the end of the accounting period. It means that revenues are recognized when they become receivable. Though cash is expected or not received and the expenses are recognised when they become payable though cash is paid or not paid. Both transactions will be recorded in the accounting period to which they relate. Therefore, the accrual concept makes a division between the accrual receipt of cash and the right to receive cash as regards revenue and actual payment of cash and compulsion to pay cash as regards expenses.
MATCHING CONCEPT The matching concept states that the revenue and the expenses incurred to earn the revenues must belong to the same accounting period. So once the revenue is realized, the next step is to allocate it to the relevant accounting period. This can be done with the help of accrual concept.
So ending my say upon accounting I would like to give a few conclusions:-*Accounting concept denotes to the basic assumptions which aid the basis of recording actual business transactions.*Business entity concept adopts that for accounting purposes, the business enterprise and its owner(s) are two separate entities.*Accounting period concept states that all the business transactions are enumerated in the books of accounts on the assumption that profits of transactions is to be ascertained for a specified time period.*Dual aspect concept states that every transaction has a dual effect.
