In this paper I will describe two different systems that companies use to record their financial transactions; the Accrual and the Cash Flows accounting, in the same way I will explain the reason why companies keeps accounts and what do they need it for.
Accounts are records in which transactions affecting liabilities, owners’ equity, revenue, expenses, and assets are registered. These accounts are mostly used to track and corroborate the usage of the cash available; moreover it has the aim of produce accounting information that will be express as useful information regarding a particular company, business, and firm. As a matter of fact it helps to aegis entity’s assets and liabilities. Hence – even though the hierarchical bureaucracy of a business get particularly convoluted – the company will be able to track transactions unmistakably.
Accrual accounting gives the opportunity to each business to list cash sales or its credits when sales occur; in fact revenues and expenses are matched in order to provide the company the profit that it is making. Therefore revenues often occur to the period when they ship the product or the project is complete, not when they receive the cash and expenses are listed during the period when incurred even though the cash is not paid yet.
In a different way the Cash Flow accounting has the aim to register the movement of the cash from or to an account, an investment, or a business; but expenses are always recognize until the project or the product is paid out, even though they previously incurred and revenues that are previously garnered are not recognized until the company receive the cash. This system is more effective when the company seeks to track the cash available during a sp...
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...tate. Moreover I defined the difference of using this particular financial tracker in long as well as in short cycle; where in the case of a short-run process it will be affected by fewer timing and matching problems, even though Finger (1994) affirmed that from a predictable point of view, cash flows in a short-run is more efficient.
However the Accrual accounting is expected to reduce easily earnings problems when the firm or the company is exposed to new investments, when it experience or undertake financial activities and large changes as well. But, Dechow, Kothari, and Watts (1998), explain that cash flow – in the case of a regression – will have an incremental explanatory power.
As a result of the analysis it is notable that Accrual and Cash Flows accounting have different results that reflect the different environment that those systems are used.
In order for Jim Turin & Sons, Inc to have used this method of accounting it would have had to match the cost of the merchandise with the revenue earned from the sale. Using the matching of revenue and cost the company would have had to have kept an actual inventory and maintained records of the costs associated with said inventory. Since the costs are not immediately deducted under the accrual method they are deferred to the year when the merchandise is
Management accounting in organisation is very important for decision-making and to make the business more efficient and therefore increasing its profits. Is the process of preparing accounts that can help managers to make day-to-day and short-term decisions, by providing them with accurate and timely key financial and statistical information...
This accounting principle requires companies to use the accrual basis of accounting. The accounting method under which revenues are recognized on the income statement when they are earned (rather than when the cash is received). The balance sheet is also affected at the time of the revenues by either an increase in Cash (if the service or sale was for cash), an increase in Accounts Receivable (if the service was performed on credit), or a decrease in Unearned Revenues (if the service was performed after the customer had paid in advance for the service).
The stereotypical image correlated to the account mirrors that of a public accountant. An individual working as a public accountant can expect to work as an independent third party to a multitude of companies. As this third party it is their duty to oversee financial transactions to ensure that the statements of not only the company, but also its’ supporting companies, correctly correspond and match up to the position, results and cash-flow of the clientele. This general quota outlining a public accountants job description is not the same for a private accountant. The main difference between a public and private accountant is that unlike the public and its handle on a multitude of accounts, a private accountant specializes with a certain company or field. With this specialization, a private accountant tackles setting up a system that records the transactions within the business. The recordation of the transactions is then generated into statem...
Dutta, Sunil, and Stefan Reichelstein. Accrual Accounting for Performance Evaluation. Research Paper Series 1886 (2005): 1-35. Print.
Transactional Processing The accounting software packages developed and distributed by Sage and Microsoft, respectively, each use their own methods for recording accounting information. Sage 50. There are three different areas that must be discussed. These are the revenue, expenditure, and financing cycles. These areas are written about from the author's own knowledge from using the software, as learned from the book by Carol Yacht (2013).
Cash flow: The cash flow statement shows in details the sources and uses of cash and classifying them from operating, investing or financing activities. It is useful as it shows how well one is creating liquidity as well as net income. Examples of cash flows may include receiving repayment of money loaned out, repaying money borrowed or using money to buy or sell an asset.
Financial and Managerial accounting are used for making sound financial decisions about an organization. They provide information of past quantitative financial activities and are useful in making future economic decisions. (Albrecht, Stice, Stice, & Skousen, 2002) The same financial data is used to derive reports for each accounting process yet they differ in some ways. Financial accounting primarily provides external reports for external users such as stock holders, creditors, regulating authority and others. (Garrison, Noreen, & Brewer, 2010) On the other hand Managerial accounting is concern with providing information that deals with the internal viability of the organization and is tailored to meet the needs of an individual organization. (Albrecht, Stice, Stice, & Skousen, 2002)
Therefore, the amount of profit obtained is somewhat arbitrary. However, cash flow is an objective measure of cash and it is not subjected to a personal criterion. Net cash flow is the difference between cash inflows and cash outflows; that is, the cash received into the business and cash paid out of the business (Fernández, 2006). Whereas, net profit is the figure obtained after expenses or cost of resources used by the business is deducted from revenues generated from the business operations activities. Nonetheless, the figure for revenue and cash are not entirely cash, some of the items may be sold on credit and some of the expenses are not paid up
Accounting is the pillar of every company to measure its growth, loss, revenue , capital, its really specify the real terms in foam of figures and sometimes in tables, in accounting there are certain rules are obtained to make more accuracy while playing with figures.
The management of cash is essential to the survival of any organization. Managing an organization’s financial operation requires knowledge of the economy and ways to maximize revenue. For any organization to operate on a daily basis adequate cash flow is required. Without cash management the organization will be unable to function because there is no cash readily available in case of inconsistencies in the market. Cash is also needed to keep the cycle of the company’s operations going.
The accounting cycle is a series of steps starting with recording business transactions and leading up to the preparation of financial statements. This financial process demonstrates the purpose of financial accounting–to create useful financial information in the form of general-purpose financial statements. In other words, the sole purpose of recording transactions and keeping track of expenses and revenues is turn this data into meaning financial information by presenting it in the form of a balance sheet, income statement, statement of owner’s equity, and statement of cash flows.
The revenue/cost period-: Revenue and the cost period in accounting that the company get income from normal business activities. It’s referred to normal business income that the company got by selling their product and service.
The following essay aims to analyse in depth a computerised accounting system and its aspects such as its history, what technologies is based on, and how it has developed since its beginning. Other aspects such as the current state of the system and the interactions with other systems and the future of the system will also be covered in this paper.
Modern information system is now popular all over the world, it also change the accounting area. Instead of the old manual analysis, many companies making effort in developing a fitted accounting information system for themselves, as they realize the advantages that the new technology brings in - more efficient and accurate in processing, integrated data, detailed record etc. However, even though there are so many benefits, the functional system also brings challenges, making new requirements to the accountants and auditors. This paper will discuss the impact of technology to the accounting information system, as well as the necessary capability ethics that the accountants should learn in this 21th century.