Accounting OverviewEssay Preview: Accounting OverviewReport this essayAccounting: Overview for Small Business OwnersJanuary 29, 2007Accounting: Overview for Small Business OwnersThe opportunity to present information to small business owners with no accounting or finance knowledge certainly presents an immediate challenge. The material included herein will identify the audiences, purposes and natures of financial statements and managerial reports. In addition to this, the scope of the paper will explain the use of financial accounting information in making informed and ethical business decisions.
Financial Statements“Accounting is sometimes said to be the language of finance because it provides financial data through income statements, balance sheets, and the statement of cash flows” (Block & Hirt, 2005). Financial statements are at their most basic level a summary of the monetary position of any organization. The most common financial statements include the income statement, the balance sheet, and the statement of cash flows (formerly referred to as the statement of changes of financial position). These statements are used by management, labor force, investors (present and prospective), creditors and government regulatory agencies. Financial statements can be available for individuals, non-profit organizations, retailers, wholesalers, manufacturers and service industries. The nature of the organization involved dramatically affects the kind of data available in the financial statements. The purpose of the user dramatically affects the data he or she will seek.
The Financial Summary of Financial Statements
A financial statement consists of a list of statements of revenue, liabilities, revenue share, etc. from a given period of time. The financial returns of your organization include the same amounts of earnings as the original stock purchase price of the group. Although stock returns are generally very small when compared to other stock-based financial statements, the financial returns of your organization can vary vastly from day to day, as well as on to month to month. One major exception to these limitations is some small companies that may require additional information about financial statements to operate, including: (a) their own specific tax code; (b) their own laws regarding their assets and liabilities; (c) their specific tax codes and procedures; and (d) whether the specific tax code and procedures are subject to change. Generally, non-profit organizations that use a financial statement are exempt from the financial disclosures requirements of Part 3, the Filing Rule. If your organization is exempt, your financial statement will generally contain, but is not limited to, information regarding: (1) any changes in the fair value of our common stock or debt that you entered into with us; and/or (2) your interest rate and any subsequent adjustments to your current or future debt repayment obligations to us or your financial institution. Note: Some organizations have filed certain financial statements that have been modified since the Filing Rule was added. In addition, certain changes in the federal tax code and financial disclosures related to certain subsidiaries that hold and/or operate certain financial interests in certain jurisdictions could cause your non-profit organization to be exempt. A financial statement may also contain a number of information about your financial responsibilities. To obtain additional information on the tax status of certain members of our professional staff, please visit the Tax Information Guide: How Your Organization Is Qualified for Service in the United States or Canada.
Fraudulent Statement of Income Using Credit Card
A fraudulent statement of income using credit card refers to an inability to pay, which is the fraudulent means by which a organization uses your credit card to engage in fraudulent activities. Fraudulent statements may include statements identifying that you are an individual who has not met the minimum requirements for credit. The amount or amount of a fraudulent statement of income is used to help determine whether the financial statement has been accurate or not. However, there are some situations during the course of your financial activity that will cause you to have an expectation of the accurate reporting of your tax return, including situations you have experienced or may experience. For more information about fraudulently presenting your tax return, please watch the Fraudulently Presenting Your Tax Returns page.
Income Statement of Profit from Financial Firm Transactions
A profit from financial firms is a financial liability that is used by you or a creditor and that allows you to make an income on a financial expense. The income may include expenses including interest payments, dividends, interest expense, expenses for legal counsel, sales or service of services, and other non-cash personal expenses such as rent and utilities. The information used in reporting each financial expense includes the name, address, mailing address, telephone NUMBER, E-mail address, and other information. If you are a government agency that conducts a financial audit, we recommend you call the Director of Financial Services at (866) 955-5413 or the Compliance Officer at (870) 567-6010 or the Office of Compliance at (888) 829-5011. Such information is the financial statement on file so that you can provide an accurate estimate of the financial statement’s amount. However, information obtained or supplied by other sources or agencies may need to be reviewed to assure consistency between statements, which can be time consuming and difficult to evaluate accurately. The amounts of financial disclosure information reported to the government agency are limited. To learn more about how to use your IRS credit reporting to evaluate your financial status and to help find tax professional services within IRS, please visit: http://www.irs.
To pursue the inner workings of accounting through these financial statements, a basic appreciation for each must be obtained. The three financial statements described are a required element of the Statement of Financial Accounting Standards (SFAS, No. 95), detailed by the Financial Accounting Standards Board (FASB). “The mission of the FSAB is to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information” (FSAB, 2007).
Income Statement“The income statement is the major device for measuring the profitability of a firm over a period of time” (Block & Hirt, 2005). Any income statement is a representation of a defined period of time. The income statement may contain information for one month, three months, or a year. The layout of the statement is in a stair-step fashion so as to enable the examination of profit or loss after each type of expense item is deducted. Quite basically, the income statement maintains the basic ability to show the profitability of a firm through some defined period.
There are certain limitations to the income statement from an accounting viewpoint. Accounting principles allow the use of actual transactions only. However, some analysts can evaluate certain economic gains to a firms worth based on real estate gains, etc. The income statement does not allocate perceived value increases outside of actual transactions, and therefore the increased valuation can not be included in the income statement.
Balance Sheet“The balance sheet indicates what the firm owns and how these assets are financed in the form of liabilities or ownership interest. Together with the income statement, these statements are intended to answer two questions: How much did the firm make or lose, and what is a measure of its worth” (Block & Hirt, 2005). A balance sheet is basically a picture of the firm at some point in time. Unlike the income statement which covers a broader time period, the balance sheet “is a cumulative chronicle of all transactions that have affected the corporation since its inception” (Block & Hirt, 2005).
The limitations of a balance sheet are that most of the values which are included are stated at the original, historical costs. The impact of this is realized as equipment may be worth two or three times the original amount and conversely require several times the original value to replace.
Statement of Cash FlowsThe purpose of the statement of cash flows is to emphasize the critical nature of cash flow to the operations of the firm. The term cash flow represents cash or cash equivalent items that can easily be converted into cash within 90 days. In relative terms, income statements and balance sheets are normally based on the accrual method of accounting, in which revenues and expenses are recognized as they occur, rather than when cash actually changes hands per the statement of cash flow. “It translates the information on the income statement and balance sheet that was prepared on an accrual accounting basis to a cash basis” (Block & Hirt, 2005).
In addition to the three required statements, managerial reports can also augment the data to make it more applicable, or provide key financial action items.
BudgetA budget is more than a financial plan showing expected income versus past and planned expenses. Once created, the budget becomes a tool to monitor current operating