Accounting 371 CA1-6 pg 26
Accounting 371
CA1-6 pg 26
Accounting quantifies operations, summarizing information, giving people the ability to see a situation from different perspectives. It 's one thing to look at sales numbers for the year, but when you combine that with expenses, you can derive many issues, such as if the expenses are too high for sales or if payroll is unusually low, you can make certain decisions about those areas. Accounting numbers help in making sound decisions based on real data and not just a hunch. By looking at accounting numbers you may easily see old accounts receivable that need to be collected, for example. Without accounting data, you may not know who owes what and for how long. These numbers are practical and valuable to any business. Accounting numbers are usually used for analysis and to answer questions. If you want to know how much rent expenses you have left in your budget, you need to look at accounting numbers. They may give you summary information about how much rent you have spent and how much you have left over.
There are accounting practices that follow the letter of the rules of standard accounting practices, but there certainly are practices that deviate from the spirit of those rules. Some of these practices are called creative accounting and earnings management. They are characterized by excessive complication and the use of novel ways of characterizing income, assets, or liabilities and the intent to influence readers towards the interpretations desired by the authors. The terms innovative or aggressive are also sometimes used. Creative accounting is at the root of a number of accounting scandals. The term is generally understood to mean a misrepresentation of the true income and assets of corporations or other organizations. One commonly accepted incentive for the systemic over reporting of corporate income which came to light in 2002 was the granting of stock options as part of executive compensation packages. Since stock
CA1-6 pg 26
Accounting quantifies operations, summarizing information, giving people the ability to see a situation from different perspectives. It 's one thing to look at sales numbers for the year, but when you combine that with expenses, you can derive many issues, such as if the expenses are too high for sales or if payroll is unusually low, you can make certain decisions about those areas. Accounting numbers help in making sound decisions based on real data and not just a hunch. By looking at accounting numbers you may easily see old accounts receivable that need to be collected, for example. Without accounting data, you may not know who owes what and for how long. These numbers are practical and valuable to any business. Accounting numbers are usually used for analysis and to answer questions. If you want to know how much rent expenses you have left in your budget, you need to look at accounting numbers. They may give you summary information about how much rent you have spent and how much you have left over.
There are accounting practices that follow the letter of the rules of standard accounting practices, but there certainly are practices that deviate from the spirit of those rules. Some of these practices are called creative accounting and earnings management. They are characterized by excessive complication and the use of novel ways of characterizing income, assets, or liabilities and the intent to influence readers towards the interpretations desired by the authors. The terms innovative or aggressive are also sometimes used. Creative accounting is at the root of a number of accounting scandals. The term is generally understood to mean a misrepresentation of the true income and assets of corporations or other organizations. One commonly accepted incentive for the systemic over reporting of corporate income which came to light in 2002 was the granting of stock options as part of executive compensation packages. Since stock
References: Jones, G. (2011, October). Generally accepted accounting principles. Retrieved from http://en.wikipedia.org Accounting Dictionary - The Web 's most complete accounting dictionary of accounting terms: http://www.ventureline.com/accounting-glossary/ Soft Assets SOFT ASSETS are human resources like people, skills and knowledge and intangible assets for example information, brands, and reputation. Soft assets are hard to value and are not usually reflected in the books of account, nor are they typically subjected to periodic inventory. Examples of soft assets include human capital, intellectual property and relationship capital. Human capital could be called expertise, but another way to think about it is capabilities, or what walks out the door every night at quitting time. It 's the money you 've invested in training. It 's whatever your people can do that a new employee walking in the door would have to learn how to do. Lots of businesses don 't think they have any Intellectual Property, but every business has IP. Your business system is intellectual property, for instance. Your policies and practices constitute IP. Your customer list is IP. Your vendor list is IP. Your instruction manual is IP. Your employee handbook is IP. Your chart of accounts is IP. Your marketing materials are IP. Your website, web pages and applications like databases are IP. Your customer list is IP, but your relationship with your customers is relationship capital. Your vendor list is IP, but your relationship with your vendors is relationship capital. Joint ventures, co-marketing, licensing, franchising, strategic partnerships and membership in professional associations all give rise to relationship capital. I am not sure on how these items can be turned into a hard asset, but they can be used at the selling of the business.