America Nos College

AMERICANOS COLLEGE

ASSINGMENT OF FINANCIAL ACCOUNTING

STUDENT NAME

:

BHASKAR CHAKRABORTY

COURSE CODE

:

ACC101C

SEMESTER

:

SPRING 2009

STUDENT ID

:

20083782

Introduction:It is not easy to provide a concise definition of accounting since the word has a broad application within businesses and applications.

What Is Accounting:Accounting is a body of principles and conventions as well as an established general process for capturing financial information related to an entity's resources and their use in meeting the entity's goals. Accounting is a service function that provides information of value to all operating units and to other service functions, such as the headquarters offices of a large corporation. This definition is a good place to start. Let's look at the key words in the above definition: - It suggests that accounting is about providing to others. Accounting information is economic information - it relates to the financial or economic activities of the business or organization. - Accounting information needs to be identified and measured. This is done by way of a "set of accounts", based on a system of accounting known as double-entry bookkeeping. The accounting system identifies and records "accounting transactions". - The "measurement" of accounting information is not a straight-forward process. it involves making judgements about the value of assets owned by a business or liabilities owed by a business. it is also about accurately measuring how much profit or loss has been made by a business in a particular period. As we will see, the measurement of accounting information often requires subjective judgement to come to a conclusion - The definition identifies the need for accounting information to be communicated. The way in which this communication is achieved may vary. There are several forms of accounting communication (e.g. annual report and accounts, management accounting reports) each of which serve a slightly different purpose. The communication need is about understanding who needs the accounting information, and what they need to know!

Accounting is a field of specialization critical to the functioning of all types of organizations. Accounting often is referred to as "the language of business" because of its role in maintaining and processing all relevant financial information that an entity requires for its managing and reporting purposes. Accountants often have a specific subspecialization and function at one of several levels. Preparation for the field is provided by secondary schools, postsecondary business schools, community colleges, and four-year colleges and universities.

Origin of Accounting: Modern accounting is traced to the work of an Italian monk, Luca Pacioli, whose publication in A.D. 1494 described the double-entry system, which continues to be the fundamental structure for contemporary accounting systems in all types of entities. When double-entry accounting is used, the balance sheet identifies both the resources controlled by the entity and those parties who have claims to those assets. Early histories of business identify the bookkeeper as a valuable staff member. As businesses became more complex, the need for more astute review and interpretation of financial information was met with the development of a new profession—public accounting. In the United States, public accounting began in the latter part of the nineteenth century. The first organization was established in 1887; the first professional examination was administered in December 1896. In the early days of the twentieth century, numerous states established licensing requirements and began to administer examinations. During the first century of public accounting in the United States, the American Institute of Certified Public Accountants (and its predecessor organizations) provided strong leadership to meet the changing needs of business, not-for-profit, and governmental entities.

What type of unit is served by accounting: Probably no concept or idea is more basic to accounting than the accounting unit or entity, a term used to identify the organization for which the accounting service is to be provided and whose accounting or other information is to be analyzed, accumulated, and reported. The entity can be any area, activity, responsibility, or function for which information would be useful. Thus, an entity is established to provide the needed focus of attention. The information about one entity can be consolidated with that of a part or all of another, and this combination process can be continued until the combined entity reaches the unit that is useful for the desired purpose. Accounting activities may occur within or outside the organization. Although accounting is usually identified with privately owned, profit-seeking entities, its services also are provided to not-for-profit organizations such as universities or hospitals, to governmental organizations, and to other types of units. The organizations may be small, owneroperated enterprises offering a single product or service, or huge multi-enterprise, international conglomerates with thousands of different products and services. The notfor-profit, governmental, or other units may be local, national, or international; they may be small or very large; they may even be entire nations, as in national income accounting. Since not-for-profit and governmental accounting are covered elsewhere in this encyclopedia, the balance of this article will focus on accounting for privately owned, profit-seeking entities.

What is the accountant's role in decision making: Accountants have a major role in providing information for making economic and financial decisions. Rational decisions are usually based on analyses and comparisons of estimates, which in turn, are based on accounting and other data that project future results from alternative courses of action. External or financial accounting, reporting, and auditing are directly involved in providing information for the decisions of investors and creditors that help the capital markets to efficiently and effectively allocate resources to enterprises; internal,

managerial, or management accounting is responsible for providing information and input to help managers make decisions on the efficient and effective use of enterprise resources. The accounting information used in making decisions within an enterprise is not subject to governmental or other external regulation, so any rules and constraints are largely selfimposed. As a result, in developing the data and information that are relevant for decisions within the enterprise, managerial accountants are constrained largely by costbenefit considerations and their own ingenuity and ability to predict future conditions and events. But accounting to external users (financial accounting, reporting, and auditing) has many regulatory constraints—especially if the enterprise is a "public" corporation whose securities are registered (under the United States Securities Acts of 1933 and 1934) with the Securities and Exchange Commission (SEC) and traded publicly over-the-counter or on a stock exchange. Public companies are subject to regulations and reporting requirements imposed and enforced by the SEC; to rules and standards established for its financial reports by the FASB and enforced by the SEC; to regulations of the organization where its securities are traded; and to the regulations of the AICPA, which establishes requirements and standards for its members (who may be either internal or external accountants or auditors). If the entity is a state or local governmental unit, it is subject to the reporting standards and requirements of the Government Accounting Standards Board. If the entity is private and not a profit-seeking unit, it is subject to various reporting and other regulations, including those of the Internal Revenue Service, which approves its tax status and with which it must file reports. Largely as a result of the governmental regulation of private profit-seeking businesses that began in 1933, an increasingly clear distinction has been made between managerial or internal accounting and financial accounting that is largely for external users. One important exception to this trend, however, was the change adopted in the 1970s in the

objectives of financial reporting such that both managerial and financial accounting now have the same objective: to provide information that is useful for making economic decisions. But it must be recognized that although the financial accounting information reported to stakeholders comes from the organization's accounting system, its usefulness for decision making is limited. This is because it is largely historical—it reflects events and activities that occurred in the past, not what is expected in the future. Even estimated data such as budgets and standard costs must be examined regularly to determine whether these past estimates continue to be indicative of current conditions and expectations and thus are useful for making decisions. Thus historical accounting information must be examined carefully, modified, and supplemented to make certain that what is used is relevant to expectations about the future. But it also must be recognized that accounting can and does provide information that is current and useful in making estimates about future events. For example, accounting provides current-value information about selected items, such as readily marketable investments in debt and equity securities and inventories, and it provides reports on what the organization plans to accomplish and its expectations about the future in budgets and earnings forecasts.

Reference:

http://tutor2u.net/business/accounts/intro_accounting.htm