Understanding the accounting cycle and importance of accounting

Understanding the accounting cycle and importance of accounting The Importance of Accounting To understand accounting information and use accounting information is important for any business. Information that is provided to external parties who have an interest in a company is sometimes referred to as financial accounting information, according to Williams, Haka, Bettner, and Carcello (2006, p. 4). The main reason in providing accounting and financial information is the use of said information in decision-making purposes. Many groups, including company management, government regulatory agencies, creditors, and suppliers, use financial information in various ways to determine a companys financial health and ability to meet obligations as such obligations become current. Companies and their personnel must understand the various steps in the accounting cycle and how such steps provide reliable information to the users of financial information. What is the Accounting Cycle? The accounting cycle is the sequence of accounting procedures used to record, classify, and summarize accounting information in financial reports at regular intervals (p. 94). The final preparation of formal financial statements is always started with the recording of business transactions and this cycle repeats so the business can prepare new, current, financial statements in response to business transactions conducted by the firm. The accounting cycle is composed of eight steps and includes journalizing transactions, posting journal entries to ledger accounts, preparing a trial balance, making end-of-the-period adjustments, preparing an adjusted trial balance, preparing financial statements, journalizing and posting closing entries, and preparing an after-closing trial balance. Remember debits increase assets while credits increase owner equity during the recording and adjustment phases of the accounting cycle. An account has only three elements: (1) a title; (2) a left side, which is called the debit side; and (3) a right side, which is called the credit side (p. 95); such accountings are called T accounts because, on paper, the recording of such accounts resembles the letter T. A sample T account is below: The account balance is determined in the difference between the debit and credit sides of the account. If the debit total is more than the credit total, the account is said to have a debit balance. If the credit total is more, then the account is said to have a credit balance. In asset accounts, the debit recording increases the amount in the asset account and a credit decreases the amount in the account. Under liability and owners equity accounts, the debit decreases the amount in the account, while a credit increases the amount in the account. This aligns with the equation and is known as the system of double-entry account. Journalizing Transactions The first step involves placing the business transactions into a journal, which records the business transactions chronologically (day-by-day). The amounts entered in this section are transferred to the debit and credit sections of the accounts in the ledger. A person investing in the firm pays $80,000 in cash in exchange for stock in the firm. The two accounts affected by this transaction are the Cash and Capital Stock. The first step in journalizing this entry is entering the name of the account debited (Cash), which is written first, along with its dollar amount entered in the left-hand money column. The name of the account credited (Capital Stock) appears below Cash and is indented to the right, with the dollar amount appearing in the right-hand money column. A description of the transaction appears below the journal entry. Below is a sample journal entry: Posting to Ledger Accounts Posting simple means updating the ledger accounts for the effects of the transactions recorded in the journal (p. 98). If the person reads the journal entry aloud, this means the previous journal entries are read as Debit Cash $80,000; credit Capital Stock, $80,000. A person copies the journal entry amounts into the general ledger, which is a series of T account entries; this is performed in the ledger as follows: This process is continued until all journal entries are record in the ledger. Once all of the ledger entries are calculated, the next step is the preparation of the trial balance. Trial Balance The trial balance is prepared to ensure debits and credits equal one another. All of the ledger accounts are listed, with debits in the left column and credits in the right column (Internet Center for Management and Business Administration, 2007). The debit column is added first, then the credit column. If the totals do not agree, the issue could be a debit was recorded instead of a credit, mistakes in arithmetic, and clerical errors in copying account balances into the trial balance. Both columns should be equal; however, this does not mean that a transaction was recorded in the wrong account. A sample trial balance is displayed below: Making End-of-period Adjustments Adjustments after the trial balance is created to record accrued, deferred, and estimated amounts and posting the adjusted entries to the ledger accounts. Once the entries are entered in the ledger, the accountant prepares the adjusted trial balance, which contains similar steps to the unadjusted trial balance; however, the adjusted trial balance contains the adjusting entries. Accrued items would include salaries, interest income, and unbilled revenue; deferred items would include prepaid insurance, office supplies, and depreciation. Preparing Financial Statements Publicly owned companies-those with shares listed on a stock exchange-have obligations to release annual and quarterly information to their stockholders and to the public (Williams, Haka, Bettner, and Carcello, 2006, p. 192). The financial statements include the income statement, the statement of retained earnings, the balance sheet, and the statement of cash flows (also known as the cash flow statement). The income statement is prepared first because it determines the amount of net income in the statement of retained earnings. The statement of retained earnings is prepared next to provide information for the balance sheet. The balance sheet is prepared from the assets, liabilities, and equity accounts of the firm. Finally, the cash flow statement is prepared using data from the other financial statements. Preparing Closing Entries to Journals and Ledger Accounts Closing journal entries closes temporary accounts such as revenues and moves these accounts to a temporary income summary account. The balance is then transferred to the retained earnings account, which is a capital account; likewise, dividend or withdrawal accounts are closed to capital. Closing entries are then posted to the ledger accounts. After these tasks the after-closing trail balance is created to ensure debits equal credits. Error-checking and correction is made to this trial balance. The Importance of the Accounting Cycle Re-visited All businesses prepare financial statements, so it is important all accountants understand the accounting cycle to ensure the proper entry of data and credible financial information out put. Eight steps comprise the accounting cycle, from the journalizing of business transactions to preparing after-closing trial balances. Without the accounting cycle, the information provided in financial statements would not be reliable and decision-making processes would be difficult to perform by users of financial information.

I Believe: A Code Of Ethics Essay -- essays research papers

I Believe: A Code of Ethics by PHIL 301 Fall Semester, 1996 I believe in the power of Mind... I believe pitchers should bat... I believe Oswald was a patsy... I believe everything is a conspiracy... I believe that people are responsible for their own actions... I believe that The Who is the greatest rock band of all time... I believe in tolerance... I believe in capitalism... I believe we are who we want to be... I believe in choice... I believe in love... I believe that Bert and Ernie are televisions first gay couple... I believe that the 1979 Orioles were robbed... I believe that people who say they like Indian food are just trying to be cool... I believe that people get the kind of government they deserve... I believe in the power of having no god... I believe I can fly... I believe that Barney is the purple Messiah... I believe that the bible was a novel, written for profit... I believe in the mother ship... I believe the Mona Lisa was framed... I believe in Pez... I believe Darwin... I believe in beauty... I believe we have the worst justice system in the world with the exception of every other system... I believe in Wally and the Beaver... I believe I didn't learn anything in kindergarten... I believe we are all in this together... I believe that breakfast is the most important meal of the day... I believe the ozone layer is just fine... I believe in dedication... I believe my daughter is a prodigy... I believe that Kathy Lee is the Anti-Christ... I believe my dad can still beat me at arm wrestling... I believe I wouldn't want to beat him... I believe you shouldn't believe everything you breath... I believe in the power of love to warp mens minds and make men great... I believe in Santa Claus, the Tooth Fairy and the seventh inning stretch... I believe in me... I believe I'm done now...   Ã‚  Ã‚  Ã‚  Ã‚  Developing a code of ethics is the most important thing a person can do. Such a code is necessary for humans because of our capacity to reason. Our ability to apply rational thought to the conduct of our lives is what makes mankind more than just an animal with an interesting thumb. These rational thoughts could very easily lead us to terrible acts, for what is in our best interest is often harmful to others. However there is another ability, peculiar to humans alone, that keeps most of us on the right path. Our ability to know what ... ...assless. And it is not susceptible to the fickle human idea of physical beauty.   Ã‚  Ã‚  Ã‚  Ã‚  But how to know if a law is just? If it serves to protect, promote and respect the human Mind. If a law or an act works against the cause of Mind than it is unjust. Such laws must not be obeyed and indeed must be worked against. But how is one to know the extent of such civil disobedience? In my case, the answer is found in rule number one. So long as I do not put my family at risk of losing a husband and father, justice must be served. It is through this kind of meshing of the four rules that ethical quandaries can be answered.   Ã‚  Ã‚  Ã‚  Ã‚  Noticeably, the rules of the code, while existing to serve the cause of good and avoid evil, do not make it clear how to know which is which. There is no specific rule that gives a clear definition of what is good and what is evil. This is because the rules, when properly applied to an ethical problem, will lead to the action that is good.   Ã‚  Ã‚  Ã‚  Ã‚  So then what is good? What is evil? Good is somewhat easier to define in that it is directly related to the last three rules of the code. An act which s

Oil Spill Recovery Essay -- Energy Environmental Wildlife Essays

Oil Spill Recovery Can you imagine a world where clean water does not exist anymore? Can you imagine going to your kitchen and seeing black water instead of clear coming out of the faucet? Would you still go to the park if the rivers, lakes, and oceans would turn the color of oil and pollution? Would you still take your kids to see the fish and other living species if they were no longer living and floating belly up? How much would you pay to get the clean rivers, lakes, and oceans back? How much would it cost to get the living organisms living again in the rivers, lakes, and oceans? Maybe it is hard to imagine this world today because it is not as bad, water is not black, and living organisms don’t float bellies up when you walk by, but if we don’t think of the long run consequences of our polluting way of life today this horrible world won’t be so hard to imagine. Water covers about 70% of the Earth’s surface. It is the most valuable natural resource we have. For the most part all living organism require water to live, without water we would not exist. Water pollution is a very huge problem. By polluting our rivers, lakes, and oceans we are harming our planet. Organisms are dying at a very disturbing rate. Our drinking water has become greatly affected as well. There are a variety of causes of pollution they include sewage, fertilizers, wash off deposits, pathogens, petroleum, radioactive substances, heat, and other. The enormous accidental petroleum spills are an important cause of pollution especially along shore lines. Off-shore drilling operations contribute to the pollution pool. Certain statistical estimates state that for every million tons of oil transported one ton gets spilled. This paper will concentrate on oil s... ... 3rd edition, pg 373. 6.McKnight, J; Pelstring L. Patuxent River Oil Spill. Road to recovery. http://www.dnr.state.md.us/naturalresource/winter2003/oilspill.html 7.The Website of Hydrocarbons Industry. Lamor Coproration AB - Oil Spill Response and Recovery Equipment. http://www.hydrocarbons-technology.com/contractors/environment/lamor 8. Harju, T, High technology Finland. Managing oil spills more effectively (2003). http://www.indixon.com/enkku/rs-harvester.html http://www.hightechfinland.com/2003/energyenvironment/environment/indixon.html 9.Oil Spills at the Water Surfave. Office of Response and Restoration, National Ocean Service, National Oceanic and Atmospheric Administration . 2002 http://response.restoration.noaa.gov/living/surface.html 10Preventing Oil Spills. U.S. Environmental Protection Agency. 2004 http://www.epa.gov/oilspill/prevent.htm

The Multitasking Generation an Article by Claudia Wallis Essay

Though there are some positive effects, the adverse impact of technology on education has been extraordinary. The technology community has worked hard to bring useful technology into our classrooms, all with good intentions to broaden our knowledge. With these good intentions also came about unwanted side effects such as distraction and disruption in the classroom. I can clearly remember many of my teachers yelling at us to put our cell phones, iPods, and iTouch phones away especially during lecture and exams. The yelling was not without just cause, students cheated with their devices along with updating their Facebook pages during class too. Though being exposed to technologies like computers from an early age may have given us the ability to do things more efficiently, technology has also made us less dependent on ourselves. Claudia Wallis, editor for Time, in her article makes known in The Multitasking Generation, â€Å"That level of multiprocessing and interpersonal connectivity is now so commonplace that it’s easy to forget how quickly it came about. Fifteen years ago, most home computers weren’t even linked to the Internet† (63). There are many things that students are able to do on their computer that their parents aren't even aware of or that the parents couldn’t do themselves. My parents always tell of how looking through the library’s card catalog and searching for the books they needed only to find out that they have been taken out. Computers have allowed us to do many things faster for example, write much faster than a typewriter or pen and paper and correct typing errors wit hout starting over. The computers and technology we now have makes it easier to almost anything and with technology so easily at your fingertips it o... ... there is no doubt that it will be used as an educational tool and just as there are concerns now, there will be concerns then. I believe that in the following years physical classrooms will be a thing of the past, with virtual classrooms becoming the norm. With these virtual classrooms there will be even more cause for concern, and if they do become the norm who knows what other sources of distractions there will be. There will always be technology as long as there are people whether for better or for worse and their advances will always be debated. Technology such as computers, iPads, and cell phones should be used modestly in the classroom. Using technology for everything during our daily lives hampers our own independence. To stay sharp minded in the classroom, people need to rely more on them and less on the technology that dominates their life today.

Beowulf vs. Gilgamesh as Epic Heroes Essay -- Epic Hero

Clack! Bang! Swish! Auuuuugh! This is the sound of clanging armor, flying spears, and slicing swords. The sound of men howling in agony as their limbs are severed from a blood thirsty blow of the enemies sword can be heard from the four corners of the earth. This can only be described as the sound of great battle. Battle was a very important part of a man’s life back during the seventh and eighth centuries. Every battle has a man who stands out at the forefront and shines above the rest. During these two time periods there stood two great men: Gilgamesh, the selfish, lustful king, and Beowulf the proud and boastful warrior. These two men, both powerful and well-respected, embody the true essence of what it means to be an epic hero. Gilgamesh’s lifestyle and rash decisions make him the perfect candidate for a life lesson by the gods. Beowulf and his boastful nature ultimately lead him to be great in life and to later fall. Finally, the two epic heroes both share some of the same good and bad qualities, thus, making each one slight mirror images of one another. According to Webster's, an epic hero is â€Å"a larger than life figure from a history or legend, usually favored by or even partially descended from deities, but aligned more closely with mortal figures in popular portrayals†. The hero participates in a cyclical journey or quest, faces adversaries that try to defeat him in his journey, gathers allies along his journey, and returns home significantly transformed by his journey. The epic hero illustrates traits, performs deeds, and exemplifies certain morals that are valued by the society from which the epic originates. They usually embody cultural and religious beliefs of the people. Many epic heroes are recurring characters in ... ...rs. In conclusion, Beowulf and Gilgamesh totally exemplify what is truly means to be a tragic hero. The two men’s lifestyles ultimately determined how their destiny would lay out. Every epic hero is the same no matter where they come from. Their proud demeanor, superhuman abilities, and treacherous journeys qualify them as special individuals because no ordinary could ever possibly do all that they do. Even though every epic hero possesses a tragic flaw that ultimately leads to their downfall, they always seem to get some good done before they leave the earth and fade into the afterlife. They are always themselves no matter what any opposition may think. No matter the circumstances they believe in the glitz and glory of battle and they always die with their name going on for ages and ages, thus, making these two the epitome of what it means to be a true epic hero.

The Great Dr. Jose Rizal

â€Å"It is a useless life that is not consecrated to a great ideal. It is like a stone wasted on the field without becoming a part of any edifice. â€Å" Jose Rizal, a man with so many accomplishments, gives all of us inspiration to put diligence and hard work in all the things we do. I am amazed that even though Rizal’s life has become sort of a series of unfortunate events, he still made it yield a positive and favorable outcome for his nation and countrymen. While he was in exile, he didn’t mind the fact that he was sent to Dapitan to live like a prisoner and yet he still managed to become abundantly fruitful with varied achievements for he practiced medicine, pursued scientific studies, continued his artistic and literary works, widened his knowledge of languages, established a school for boys, promoted community development projects, engaged in farming and commerce and many others. Despite his many activities, he kept an extensive correspondence with his beloved family, relatives, fellow reformists, and his friends who were eminent scientists and scholars of Europe. It is only when it was mentioned in the documentary have I realized that Rizal never left the country to his own purpose and advantage, but to extend even greater his sacrifice for the sake of the Filipinos. Rizal truly was a person for his countrymen, he truly was a patriot and nationalistic for he never wanted to see his fellow countrymen being oppressed and being exploited -what made Jose Rizal stand out of the others as a hero to a nation. He truly was a man of action, he did not only look over the people nor just tell people what to do, and he helped them in their everyday work. Rizal was intelligent and yet very humble. He always put his countrymen first before him as well he never failed to express how he loved so much his family and the people he held close to his heart through his letters to them all throughout. These are credible and more than enough reasons for me to justify that Rizal is our hero, our inspiration and our lesson of the past that just like him, we should also strive hard to live honorably and be a man for our country.

New Heritage Doll Company Essay

1. Describe and compare the business rationales for each of the two project proposals under consideration. Which do you feel is the more compelling? Project 1: Match My Doll Clothing Line Expansion Expand the successful Match My Doll Clothing Line to include matching all-season clothing for tween girls and their dolls. Pros: Current popularity will enable company to maintain premium prices. Company could take advantage of off-peak discounts offered by some suppliers and contract manufacturers. Would help reduce the seasonality in New Heritage’s sales and earnings. Project poses moderate risk – about the same as the production division’s existing business as a whole. Cons: Company has to exploit the opportunity without delay to be able to exploit the current popularity of the original Match My Doll Clothing line. Large outlays for R&D, market research and marketing are needed. Project 2: Design Your Own Doll Targets existing customers and will offer customized dolls that the customer could customize to create one-of-a-kind addition to their existing collection of dolls. Pros: Market research with focus group indicates that there is a lot of enthusiasm for the product concept. Company will be able to charge premium prices for this product. Will improve customer loyalty. Will create a unique experience for customers. Cons: Increased manufacturing complexity and expense, involves higher risk. Low production runs and volumes would mean higher fixed costs per unit. Therefore, higher breakeven volume for project (longer payback period). Would require the company to make significant changes to its existing technology infrastructure, expand its webhosting capacity and involve legal measure to implement new third party service agreements to provide better service quality. Longer development time (including product testing) – up to 12 months. Much larger initial investment required than the first project.  The Match My Doll Clothing Line expansion project uses existing infrastructure and technology/ products. It will also fill the â€Å"gap† in the year-round revenues that occur due to the seasonality of demand. This project requires a smaller investment and has a shorter payback period. The Design Your Own Doll project requires a larger investment and will require new equipment, technology and third-party agreements. The business plan and process will become more complicated. This project also has a longer payback period. On the other hand, this project will earn higher returns. Both the projects will require some continuing capital expenditures. However, the Design Your Own Doll option will require higher capital expenditures compared to the Match My Doll Clothing Line project. Design Your Own Doll project is expected to make higher returns according to the projections. It also carries a higher risk due to the complexity of operations involved. See attached sheet for detailed calculations. 2. What are the free cash flows that are relevant to analyzing the two projects? 3. Match My Doll Clothing Line Free Cash Flow (without TV) = $2,091.54 Match My Doll Clothing Line Free Cash Flow (with TV) = $16,344.40 Design Your Own Doll Free Cash Flow (without TV) = -$1,019.8 Design Your Own Doll Free Cash Flow (with TV) = $24,732.06 4. What are the NPVs of the two projects? What decision should Emily Harris recommend? 5. NPV Calculation Match My Doll Clothing Line: NPV = $7,148.35 Design My Doll: NPV = $7,285.68 Based on the calculations in the above steps, it is determined that Design My Doll project has a higher NPV and hence would be a better choice, but the first project is less risky and has a shorter payback period and therefore might be more attractive to the board.