Accounting-Memo - From a small entity to a large entity...

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From a small entity to a large entity, there usually exists a mechanism to infer, analyze and use the financial data resulting from the company's operations. Such financial data of an entity is communicated in the form of financial statements to various stakeholders of an entity. To develop financial statements and any other internal and external financial data, entities follow certain procedures that involve "identifying, measuring, and communicating economic information" [1]. From a generic definition perspective, accounting may be defined as the process which involves (1) identifying the actions that impact an entity financially, (2) measuring the effects of these actions on the financial status of the entity, (3) analyzing and interpreting the past and current financial performance of the entity, and (4) communicating the resulting economic data to the entity's stakeholders. Information developed from accounting process is used by various stakeholders of an entity such as the management, investors, government, employees and others. An entity's management may use the accounting information for present and future planning purposes, to direct salient operations to achieve the end result desired from such planning, and to control the activities of the entity such that the goals of the entity are achieved efficiently. For example, let us consider an entity called XYZ Incorporated that wants to expand into the lucrative nanometer integrated circuit design market. Using the past and present economic information, such an entity will plan for the associated costs and what kind of profits or benefits the entity can achieve vis-a-
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This note was uploaded on 03/15/2011 for the course BUSINESS 501 taught by Professor Jackaroo during the Spring '11 term at University of Texas.

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Accounting-Memo - From a small entity to a large entity...

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