Principles Of Financial Statement Paper

Submitted By monicabertrand17
Words: 750
Pages: 3

Financial Statement Paper
Monica Bertrand
Acc/280 principles of Accounting
August 17, 2011
Sandra Brown

Financial Statement Paper

Accounting is a service activity. The function of accounting is to provide quantitative information, dealing with finance, about economic entities that is intended to be used in making economic decision. Accounting is a systemic recognition, and a representation of financial information to assist in decision making. Every business generates profit and solvent. It is important to be able to track and monitor the gain or increase of a business’s income and profit within any organization. Accounting is used it identify record, and communicate events of a business. In accounting you must keep track of the flow of money. Without accounting practices, you can easy lose track of finances of a business. A fundamental part of running a business is to keep an accurate balance sheet. Accountants develop systems and processes to evaluate the different transactions of a business. Sales, purchases, and interest earned from investments are monetary and need to be posted to a specified account record. Accountants have a code of ethics that they adhere to that ensures integrity in reporting process. With an accounting system a business will limit the amount of errors and reduce the risk of non-compliance with Federal laws. There are four basic accounting statements, statement of financial performance which is also known as Income Statement or just Profit and Loss Statement. Then there is Statement of Financial Position, known as Balance Sheet. Thirdly, Cash flow Statement, and finally the Statement of Changes in Equity. Accounting consists of three basic activities, it records, and it identifies, and communicates the economic events of a business. Accountants identify economic events like sales of goods and services that pertain to the business. Accountants record events to keep accurate financial history of events. The records are kept in chronological order to keep the records organized and accurate. These records are accounting reports that is communicated to others who share interest or stake in the company. These records are used to make important decisions in regards to the company’s future. The most common types of accounting reports are financial statements. They include statements, retained earnings, balance sheets, and statements of cash flow. Income statement shows revenues and expenses. It informs the company if it has a financial gain or loss in revenue. A retained earnings statement is a summary of changes of retained earnings for a certain period of time and gives information as to why there is an increase or decrease. Transactions and recording revenue and expenses are vital business processes that are assigned to an accounting department or financial manager. Accounting allows companies to record, analyze, and retrieve financial information that can determine a company’s status and gives reports needed to make financial decision. Accounting in business is maintaining the financial