Accounting Principles
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Accounting Objectives
AIU Online
ACCT205-1104A-10
Abstract
In this essay we are asked to explain the basics of accounting to students at a local career fair in our hometowns. I will explain the primary objectives of accounting, and I will also give some basic terminology to help explain accounting.
Accounting Objectives
Accounting is a process that measures, identifies, and communicates how a company or person is doing financially (Godwin, 2010). Accountants use journals to record the client’s credits and debits for a specific period of time. There are many assumptions that take place in accounting to help determine how successful a person or company is doing. Economic entity assumption is the assumption that an owner’s personal assets can be separated from the business’s financial activities (Godwin, 2010). An example of this would be an owner of a photography business that is buying film for personal use needs to keep that listed separately than when they are buying film for their business. Next they use time period assumption, which allows accountants to assume that their financial information can be communicated in short periods of time; such as quarterly or annually (Godwin, 2010). Monetary unit assumption simply means that the dollar is the most effective means to communicate economic activity (Godwin, 2010). This means that if any economic activity cannot be expressed in dollars, it doesn’t belong in the accounting system. Finally, the going concern assumption, allows accountants to believe that a company will continue to operate into the foreseeable future (Godwin, 2010).
Accountants use income statements to keep track of all of the company’s expenses and revenues. Revenues are the income or increase in resources that a company receives for selling goods or services to their customers. An expense would be a decrease in income or resources from the sale of goods or services. Some easy examples of expenses would be paying employee...
AIU Online
ACCT205-1104A-10
Abstract
In this essay we are asked to explain the basics of accounting to students at a local career fair in our hometowns. I will explain the primary objectives of accounting, and I will also give some basic terminology to help explain accounting.
Accounting Objectives
Accounting is a process that measures, identifies, and communicates how a company or person is doing financially (Godwin, 2010). Accountants use journals to record the client’s credits and debits for a specific period of time. There are many assumptions that take place in accounting to help determine how successful a person or company is doing. Economic entity assumption is the assumption that an owner’s personal assets can be separated from the business’s financial activities (Godwin, 2010). An example of this would be an owner of a photography business that is buying film for personal use needs to keep that listed separately than when they are buying film for their business. Next they use time period assumption, which allows accountants to assume that their financial information can be communicated in short periods of time; such as quarterly or annually (Godwin, 2010). Monetary unit assumption simply means that the dollar is the most effective means to communicate economic activity (Godwin, 2010). This means that if any economic activity cannot be expressed in dollars, it doesn’t belong in the accounting system. Finally, the going concern assumption, allows accountants to believe that a company will continue to operate into the foreseeable future (Godwin, 2010).
Accountants use income statements to keep track of all of the company’s expenses and revenues. Revenues are the income or increase in resources that a company receives for selling goods or services to their customers. An expense would be a decrease in income or resources from the sale of goods or services. Some easy examples of expenses would be paying employee...