ACC501-mod1-case

ACC501-mod1-case - Module One - 1 - Financial Statements...

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Module One - 1 - Financial Statements Module 1 Case Assignment ACC501 – Accounting for Decision Making Dr. David Wagner
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Module One - 2 - Introduction A company’s financial statement sets the tone for millions of individuals who are looking to invest in the company. The financial statement gives essential information about the profits (or in some cases, losses), the financial condition, or cash flows of a business. Potential stockholders and managers should have a sense of what is going on in the business financially. For this case assignment I will discuss generally accepted accounting principles, double entry accounting, historical cost, accrual basis vs. cash basis accounting, and current assets and liabilities vs. non-current items. Generally Accepted Accounting Principles Most companies have a distinct set of rules they are ordered to follow. In the military, we constantly have inspections and get rated based on how well we do. In the world of accounting, in relation to generally accepted accounting principles, the term that sticks out is “generally”. The Federal Accountings Standards Advisory Board (FASAB) (2010) states that “the term ‘generally accepted accounting principles’ has a specific meaning for accountants and auditors”. When someone is looking at the financial statements, the rules and standards used are just what the statement says, “Generally accepted” and not necessarily carved in stone. The generally accepted accounting principles (GAAP) are basically the rules companies use to prepare and regulate how they report financial statements such as balance sheets, income statements, and the statement of cash flows. According to the American Institute of Certified Public Accountants (2010), “the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB) are authorized to establish” the GAAP (pg.
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Module One - 3 - 1). These “rules” are what keep a company from deciding in its own best interest what financial information they want to report (and how they want to report it) versus what might be in the best interest of customers, stockholders, and potential investors. If one is attempting to have anything to do with the financial reporting of a company, a basic understanding of GAAP is fundamental. Double Entry Accounting Double-entry accounting is a standard accounting method that involves each transaction being recorded in at least two accounts, resulting in a debit to one or more accounts and a credit to one or more accounts. Double entry accounting provides a method for quickly checking accuracy because the sum of all accounts with debit balances should equal the sum of all credit balance accounts. According to Shelley Elmbald, ‘the best accounting software for business uses double
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This note was uploaded on 10/17/2010 for the course ACC 501 taught by Professor Davidwagner during the Winter '08 term at Touro University.

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ACC501-mod1-case - Module One - 1 - Financial Statements...

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