The Most Important Components Of Financial Accounting Essay

The Most Important Components Of Financial Accounting Essay

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In this essay, I will briefly describe some of the most important components of financial accounting: the accounting cycle, merchandising operations, internal cash and control, receivables, plant assets, natural resources and intangibles. I will summarize their concepts, explain their key applications, and describe their integration of implications in the Accounting Cycle.
The accounting cycle is the process by which companies produce their financial statements for a specific period (Nobles, Mattison, and Matsumura 227). It involves 10 steps with one of them being optional. The most important part of the cycle is the generation of financial statements (income statement, statement of retained earnings, balance sheet, and cash flow statement).
Financial statements show how a business is performing. This information is important for internal and external decision makers. The Financial Accounting Standards Board (FASB) requires publicly traded companies to publish them.
The Accounting Cycle is relevant now and will be so in the future. It is arguably the most efficient way to conduct accounting operations within a company.
Two ways business can be classified are service companies and merchandisers. Although they share similarities, their adjusting and closing entries must be accounted for differently. There are additional factors such sales return and allowances, sales discounts, and cost of goods sold that must be accounted for. Their financial statements will differ slightly as well. The components of a merchandiser’s operating cycle involve cash, inventory, and accounts receivable. Inventory is purchased, it is sold to customers, and cash is collected from customers.
Merchandisers operate using a perpetual or periodic inventory ...

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... are consumed (Nobles, Mattison, and Matsumura 572). Examples of these are: iron ore, oil, natural gas, coal, timber, diamonds, and gold and silver. When accounting for these, depletion expenses and accumulated depletion is calculated.
Intangible Assets have no physical form (Nobles, Mattison, and Matsumura 573). Examples of intangible assets are patents, copyrights, trademarks, and franchise agreements. Unlike other assets, intangible assets expire. Since this occurs, they must be amortized and properly accounted for.
Proper financial accounting is imperative to keeping a business profitable and ensuring that it is operating within the limits of the law. What I described in this report is only a tiny portion of what happens in its process. The next time you purchase a product or service, think about how you personally impacted the accounting operations of a company.

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