Why Are Accurate Financial Statements Important for Outside Business Interests
Why are accurate financial statements important for outside business interests?
Matt
ACC 205: Principles of Accounting I
Professor Kaplan
Ashford University
December 22, 2011
Accounting is specifically “a system by which economic information is identified, recorded, summarized and reported for the use of decision makers”; however, accounting involves interpretation and analyzing of all financial information, including taxing, personal financial information and investment (Alba, Bathija, & Thonton, 2005). Accounting is defined as the language of business, in that it specifically records the financial data that is required for businesses to operate both efficiently and effectively. Modern accounting includes investigation, forecasting, analyzing, compliance, as well as record keeping and report generation (Gaylord & Ried, 2006). Accounting is said to be a service activity designed to accumulate, measure, and communicate financial information about businesses and other organizations and to provide information for making informed decisions about the business and about how to best utilize resources within the business (Albreacht, Stice, Stice, & Swain, 2008). Accounting leads to the generation of reports and documents, which include financial statements. If accounting is the language of business, then accounting financial statements are the dictionary that defines the terms and the rules of the language (Horngren, Harrison, & Oliver, 2012). Financial statements are a key product of the accounting process as they report on a business in financial terms. In fact, the financial statements that are created by the business can tell the complete story and create an accurate picture of the business that can be used by those outside of the business, such as investors and other businesses, to gauge the health and profitability of the business or to make decisions regarding investing or buy-outs (Horngren, Harrison, & Oliver, 2012). Therefore
Matt
ACC 205: Principles of Accounting I
Professor Kaplan
Ashford University
December 22, 2011
Accounting is specifically “a system by which economic information is identified, recorded, summarized and reported for the use of decision makers”; however, accounting involves interpretation and analyzing of all financial information, including taxing, personal financial information and investment (Alba, Bathija, & Thonton, 2005). Accounting is defined as the language of business, in that it specifically records the financial data that is required for businesses to operate both efficiently and effectively. Modern accounting includes investigation, forecasting, analyzing, compliance, as well as record keeping and report generation (Gaylord & Ried, 2006). Accounting is said to be a service activity designed to accumulate, measure, and communicate financial information about businesses and other organizations and to provide information for making informed decisions about the business and about how to best utilize resources within the business (Albreacht, Stice, Stice, & Swain, 2008). Accounting leads to the generation of reports and documents, which include financial statements. If accounting is the language of business, then accounting financial statements are the dictionary that defines the terms and the rules of the language (Horngren, Harrison, & Oliver, 2012). Financial statements are a key product of the accounting process as they report on a business in financial terms. In fact, the financial statements that are created by the business can tell the complete story and create an accurate picture of the business that can be used by those outside of the business, such as investors and other businesses, to gauge the health and profitability of the business or to make decisions regarding investing or buy-outs (Horngren, Harrison, & Oliver, 2012). Therefore
References: Alba, J., Bathija, M., & Thonton, M. (2005). Vault career guide to accounting . New York, NY: Vault, Inc. Albreacht, S., Stice, J., Stice, E., & Swain, M. (2008). Accounting: Concepts and Applications. Mason, OH: Thomson Higher Education. Gaylord, G., & Ried, G. (2006). Careers in accounting . New York, NY: McGraw-Hill. Francis, J., & Schipper, K. (1999). Have Financial Statements Lost Their Relevance? Journal of Accounting Research, 37(2), 319-352. Graham, J., Harvey, C., & Rajgopal, S. (2005). The economic implications of corporate financial reporting. Journal of Accounting and Economics, 40(1-3), 3-73. Horngren, C., Harrison, W., & Oliver, M. (2012). Accounting (9th ed.). Upper Saddle River, NJ: Prentice Hall. Horngren, C., Sundem, G., Stratton, W., Schatzberg, J., & Burgstahler, D. (2007). Introduction to Management Accounting, 14th ed. Upper Saddle River, NJ: Prentice Hall. Porter, G., & Norton, C. (2011). Financial Accounting (7th). Mason, OH: South-Western Cenage.