Week 6 Business.docx - BUSN 100 | WEEK 6 Finance and Accounting All businesses need resources such as personnel equipment and financial support to

Week 6 Business.docx - BUSN 100 | WEEK 6 Finance and...

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B U S N 1 0 0 | W E E K 6 Finance and Accounting All businesses need resources, such as personnel, equipment, and financial support, to function. For a business to sustain its operations and remain profitable, these resources must be carefully managed. To handle financial resources, businesses need a robust system of accounting and financial management to ensure that revenues and expenditures are carefully tracked and used in a manner that maximizes the profits earned by the business. This lesson will provide an introduction to accounting, including an overview of accounting processes. This overview will look at the different types of financial statements and how businesses use those to manage financial activities. This lesson also will discuss the need for accounting managers to practice ethical behavior, and the lesson will provide an overview of the financial auditing process, which can help ensure that accountants practice ethical behavior. LEARNING OBJECTIVES: Explain how firms use accounting. Describe sources of financing for businesses. Overview of Accounting Accounting can be defined as “the recording, classifying, summarizing, and interpreting of financial events and transactions in an organization to provide management and other interested parties the financial information they need to make good decisions about its operation” (Nickels, McHugh, and McHugh 2013, 464). Accounting has two basic purposes: To provide the leaders and managers of an organization with the financial information they need to make well-informed decisions about the organization’s operations. To provide financial information about the organization to its stakeholders. Stakeholders are individuals, groups, or other organizations that have an interest in the organization’s activities, including its financial dealings. Stakeholders are those who are affected by the organization’s policies and actions, and may include employees, labor unions, owners, suppliers, creditors, investors, and the community where the organization operates (Business Dictionary). For businesses, the government is also a stakeholder for tax purposes. For government agencies, taxpayers are stakeholders.
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Types of Accounting: Managerial and Financial Businesses typically use two types of accounting—managerial accounting and financial accounting. MANAGERIAL ACCOUNTING Managerial accounting is the process accountants use to identify, quantify, analyze, understand, and communicate an organization’s financial information to its leaders, managers, and employees. Managerial accounting is used internally to assist the organization’s staff as they make decisions about operations. Objectives of managerial accounting include developing financial plans to help an organization achieve its goals and objectives, executing those plans, and then taking the steps needed to ensure those plans are achieved. Some key activities in managerial accounting include preparing an organization’s
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